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What is a cooperative?
A cooperative, sometimes called a co-op, is a organization (often a business) that is owned by those who use it. People come together to meet common needs or goals that they may not be able to meet if they were working independently. The international cooperative community has accepted 7 cooperative principles and 6 cooperative values that form the foundation of all organizations that describe themselves as cooperatives.
How is a cooperative different from a traditional corporation?
Cooperatives are based on democracy. Each member has one vote, no matter how much they have invested. In traditional corporations, owners of 60% of the shares have 60% of the votes. Co-ops are radically different because equality, equity, and democracy are core values and each members’ votes count equally.
Can I form a cooperative in Georgia?
Yes! While Georgia’s cooperative statute is very narrowly defined and most co-ops we work with do not qualify to incorporate under that statute, cooperative attorneys have had much success incorporating cooperative businesses under Georgia’s traditional corporation statute and writing the cooperative principles and practices into the bylaws.
What are the cooperative principles?
The principles are the structure by which the organizations put their values into practice.
- Voluntary and Open Membership
- Democratic Member Control
- Member Economic Participation
- Autonomy and Independence
- Education and Training
- Cooperation Among Cooperatives
- Concern for Community
What are the cooperative values?
Can we be “a cooperative” and not be a corporation? (i.e. a nonprofit, a partnership, or even unincorporated)
If you ask 10 different cooperators what a “cooperative” is, you’ll probably get 10 different answers. At GCDC we usually define a cooperative as any organization that applies the cooperative principles and values, no matter how it’s organized. Sometimes it makes more sense to be a nonprofit corporation, a partnership, or sometimes it even makes more sense to be an informal (not legally recognized) organization. The decision around how to organize is one of the most important decisions your organization can make and we can assist you in finding the structure that works best for you. While nonprofits don’t have stock owners, they often have members and their bylaws can be written to lay out the cooperative principles. Often worker cooperatives begin as partnerships, and transition to cooperative corporations after some growth has occurred. The cooperative principles are usually written into their operating agreements. While the IRS may not recognize nonprofits or partnerships as “cooperatives” we do, and will work to assist you grow and flourish!
What are the advantages of forming a cooperative over a traditional corporation?
One of the biggest advantages we see is the collective brain power of multiple owners working together in a common goal. Cooperatives frequently have more worker engagement than other traditional businesses do. Whether the co-op is formed as a consumer, worker or other type of co-op, strong co-ops educate their workforce on what it means to be a co-op and see the benefits of that in the workforce. Cooperatives organized for-profit, do pay taxes and those organized as cooperative corporations have certain tax advantages that traditional corporations do not. These are called patronage dividends and are essentially a means of returning profit back to the owners.
What is patronage?
Patronage is the method of returning profits to the owners and are calculated based on the patronage of the owner to the business. So, in a worker co-op, the profit is usually divided up based on how much each owner worked. In a consumer owned co-op, it is divided up based on how much each owner shopped at the co-op. For a producer co-op, it would be based on how much product each owner provided to be sold by the co-op. Because co-ops exist to serve the needs of the members, the profit not needed by the co-op can be returned to the owners, in the form of a cash payment, or a greater investment in the cooperative itself. This is usually a win-win situation for the co-op and the owners. Because the owners of the co-op are vested in the long term success of the co-op and are also the recipients they are best able to make the decision. Patronage decisions are generally made after the fiscal year is finished.
Do all owners vote on every decision? That seems like an impossible situation…
Yes, that would be very burdensome, so most cooperatives vote for a board of directors or a manager, which then reports back to the membership. This way, daily decisions and processes are not slowed down by the cooperative structure.
How do I get started with one of GCDC’s Co-op Pathway Programs?
- Book a quick check with one of our co-op coaches
- Complete the GCDC intake questionnaire
- Register for the next co-op info session
- Register for the next Co-op Academy
- Register for the next GCDC webinar
- Apply for technical assistance
- Watch/Listen to GCDC Pathways 101 to learn more about the next steps
- Visit our connect page to learn how GCDC and/our our partners can support you with your co-op vision from concept to creation