Co-op Q&A

What is a cooperative?

A cooperative is an autonomous association of persons, united voluntarily to meet their common economic, social, and/or cultural needs and aspirations through a jointly owned and democratically-controlled enterprise. This definition comes from the International Cooperative Alliance.

A cooperative is an organization, such as a customer-owned grocery store, a worker-owned bakery, or a farmer-owned food brand, that is owned and democratically governed by its members, who share in the profits or benefits.

Is a cooperative for-profit or not-for-profit?

A cooperative's purpose is to benefit its members as patrons, that is, people who do business with the cooperative and share in the income or savings that result. A cooperative is not for profit for itself, or for its shareholders as such, but for the benefit of its members as patrons. It *is* the purpose of a cooperative to create income for worker-members, sales income for producer-members, or savings for customer members. Cooperatives can pay returns on capital, but that is subordinate to the purpose of benefiting members as patrons.

What is patronage?

Patronage is the business that members* transact with their cooperative, under an agreement to share the surplus among the members in proportion to the quantity or value of business they do with their cooperative. See I.R.C. s. 1388.

*"Patron" means a person who does business with a cooperative and shares in patronage dividends; "member" means someone who owns equity and/or has voting rights in a cooperative. Not all members have to be patrons, and not all patrons have to be members.