A cooperative, or a co-op, is another type of business entity. In the U.S., there are an estimated 65,000 co-ops, and one-third of people are members of at least one cooperative.
What sets a cooperative apart from other types of corporations is who the owners of the company are. While other types of corporations are owned by shareholders or stockholders, co-ops are owned by its members or the people who use the services of the cooperative. Some cooperatives are employee-owned.
To become a member of a cooperative, a person makes a financial contribution. Since the focus of co-ops is on building and maintaining community, most exist to meet the specific needs of their members.
Any profits the cooperative earns are either re-invested in the company, similar to a nonprofit corporation, or distributed among its member-owners, as with a for-profit corporation.
IN WHAT SECTORS CAN COOPERATIVES BE FOUND?
You’re likely to find the co-op model in a variety of economic sectors, including:
- Agriculture: Many big, recognizable farm brands in the U.S. are cooperatives, designed to give smaller, individual farms more of a bargaining chip and a better ability to market and promote their products. A few examples include Land O’Lakes, Blue Diamond and Ocean Spray.
- Financial services: If you belong to a credit union, then you have seen the co-op model in action. Credit unions are member-owned, which is one of the reasons why they usually offer better interest rates on loans and savings accounts compared to corporately-owned banks.
- Education: Educational co-ops can take the form of schools that are owned by the teachers who work there, institutions that share purchasing power to reduce the cost of books and supplies or parent-owned organizations that provide services directly to their members.
- Healthcare: Healthcare co-ops can take the form of purchasing groups that use the size of their member base to get the best prices on products or services. In some cases, healthcare co-ops can take the form of pharmacist co-ops or home-based care cooperatives.
- Housing: Housing cooperatives are often found in major cities. Unlike a condo, when a person buys a unit in a co-op building, they are purchasing a part of the cooperative, not a share of the building. Membership in the co-op grants someone the right to live in one of the buildings the cooperative owns.
- Groceries: Grocery cooperatives are owned by people who do their shopping at a particular market. Along with contributing to the food co-op financially, many members also contribute their time, in the form of work shares.
- Utilities: Many utility companies in the U.S. are cooperative. Utility co-ops provide electricity, water and telecommunications services to homeowners. In the U.S., more than 18 million homes receive electrical power from an electricity co-op.
- Worker: In the case of worker co-ops, the company is owned and managed by the people who work for it. Each employee in a co-op has equal say in the organization and management of the business, as each employee gets one vote.
- Purchasing: Purchasing cooperatives allow a group of small businesses or individuals to take advantage of bulk purchasing discounts. Purchasing co-ops help to make the cost of doing business or living more affordable.
- Insurance: An insurance co-op was the first cooperative in the U.S. Insurance cooperatives are fully owned by the people who hold policies with the companies. Any profits earned by the policies are distributed to the members or disbursed through discount programs.
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