Business Co-operatives

The Rochdale Society, of 1844 on Toad Lane in England was a group of 28 persons consisting of weavers, entrepreneurs and shoemakers who created a successful system where they could purchase supplies and goods cooperatively. Their policies and principles may have evolved but are still in existence to this day.

The business co-operative operates today under specified Federal and State statutes to fulfill criteria and operate with principles that characterize it from other business models. These four main principles are ;

– Service at cost
– Financial obligation and benefits are proportional to use
– Limited return on equity capital
– Democratic control

A co-operative is able to achieve buying power at a lower cost than would otherwise be possible individually. They enjoy limited liability and continuity of existence because they are not established for a speculative purpose. They are democratically controlled (one member, one vote) and they share on profit surplus among their members in proportion to the amount of business done with them by each member.

Characteristics of a business co-operative are as follows;

– Capital funds are raised by sale of shares to participating members.
– Each member, irregardless of capital contribution, is entitled to a vote.
– No voting by Proxy is allowed.
– A board of directors, elected by members, is responsible for the management of the co-operative. A manager is appointed by the board.
– Part of the profit which is not retained, is paid out as interest on capital or as patronage return.
– Patronage return or share of surplus, which a member receives is in proportion to the amount of business which the member has done with the co-operative.
– Shares may not be transferred without the approval of the board of directors.
– Incorporation of the co-operative may attain limited liability for its members and continuity for the business.

The advantages of a co-operative business are as follows ;

– No one or group of person(s) gains control of the business
– Members save money on purchases
– Members obtain more on sales

The types of business co-operatives that exist are as follows ;

– Consumer co-operatives, retail goods to the public
– Market co-operatives, market milk, fruit and produce for their members and buy supplies for their members.
– Financial co-operatives, known as Credit Unions or Caisses Populaires, accept savings, deposits from members and make loans to them.
– Insurance co-operatives, provide life, fire, hail and liability insurance to their members.
– Service co-operatives, provide housing, rural electrification, medical insurance, transportation, recreation facilities, machinery rental and funerals for their members.

The disadvantages of the business co-operative must also be considered and are as follows;

– Control is not proportional to ownership
– Good management is not always met
– Few people will risk contributing monies under such conditions
– Not able to raise monies from the general public

The decision to join a co-operative with your own business and as a business owner can be best based upon the performance of the co-operative and your own level of comfort and trust. Familiarity with business management and co-operative business operations will help towards a informed decision. As in all business ventures a review of the business plan will also provide insight as to whether to support and join a co-operative for your own business needs.

A co-operative is not for everybody and this article is only for information purposes only and yes, I am a member of my own local Credit Union. Read related —> here and there.

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Article(C)2009 Dame Scribe, all rights reserved. Dame Scribe creates articles and posts online. She creates articles on business skills & development, health, science, technology and society and has a strong passion for writing.