What Is a Business Cooperative?

by Danielle Bloom

1 min read

A business cooperative is a type of entity that’s owned by everyone who uses its services. In exchange for paying for goods or services, you earn an equity share in a cooperative based on how much you pay and how much profit the cooperative earned. Sometimes, you receive cash distributions that pay down your equity share. If you were responsible for 1% of a business cooperative’s total business, and the business earned a profit of  $100,000, your earned equity share would be $1,000. If you receive a cash distribution of $100, the cooperative would still owe you $900 in future cash distributions. The greatest benefit of a business cooperative is the reduced need for business loans. There is often a delay between when you pay for your services and when the cooperative issues a cash distribution. This allows the cooperative to use your money to improve and expand. In the example above, the cooperative uses your $900 to run the business in the short term so you can be paid over time. Because cooperatives have different reporting needs, you should consider customizable software if you’re setting up a cooperative. Business cooperatives can exist in several different industries. You’re most likely to see cooperatives in agricultural, utility, or food industries. By purchasing telephone services from a utility cooperative, you get telephone service and distribution of a portion of the profits. Plus, all members of a cooperative typically have equal voting rights, regardless of how much service you pay compared to someone else. Although cooperatives are for-profit entities, all of their profits are distributed to their customers.

References & Resources

Related Articles

Poker Face or Open Book? Nonverbal Communication at Work

If you want to make lasting, positive impressions on those with whom…

Read more

Exploring Relationships: An Analysis of Value Net

You may be able to make your small business more innovative and…

Read more

Does Your Small Business Qualify for a Government Grant?

New or expanding small business owners should always be aware of alternative…

Read more