20 FAQ About Cooperatives

This article answers common questions asked by people about cooperatives.

What is a cooperative?

A cooperative is a business owned and controlled by a group of people who use its services or products. Cooperatives are based on the principles of democracy, equality, and solidarity, and are organized to meet the common needs and aspirations of their members.

How does a cooperative differ from a traditional business?

In a traditional business, the owners are usually motivated by profit and have the primary goal of maximizing shareholder value. In a cooperative, the members are both the owners and the users of the business, and they are motivated by the desire to meet their own needs and improve the quality of their lives. Additionally, the decision-making power in a cooperative is distributed equally among the members, whereas in a traditional business, it is concentrated in the hands of a few owners or shareholders.

How is a cooperative structured and governed?

Cooperatives are typically structured as non-profit organizations and are governed by a board of directors elected by the members. The board is responsible for making decisions on behalf of the cooperative and for overseeing its operations. Members of the cooperative may also participate in decision-making through meetings and voting.

Who can be a member of a cooperative?

Membership in a cooperative is usually open to anyone who uses the services or products offered by the cooperative and is willing to accept the responsibilities of membership. In some cases, membership may be limited to certain groups of people, such as employees or residents of a particular area.

How do cooperatives make decisions?

Cooperatives typically use a democratic process for decision-making, in which members have an equal say and vote. Some cooperatives may use a consensus-based decision-making process, in which all members must agree on a course of action before it can be implemented.

How are profits distributed in a cooperative?

In a cooperative, profits are typically distributed among the members in the form of patronage dividends based on the amount of business each member does with the cooperative. Any remaining profits may be retained by the cooperative to invest in future growth or used to provide additional benefits to members.

Can cooperatives raise capital like traditional businesses?

Yes, cooperatives can raise capital in a number of ways, including by selling shares to members, borrowing from banks or credit unions, or issuing bonds. However, cooperatives may also use alternative financing methods such as crowdfunding or peer-to-peer lending to raise capital.

How are cooperatives regulated?

Cooperatives are subject to the same laws and regulations as traditional businesses, including tax laws, employment laws, and consumer protection laws. In addition, cooperatives may be regulated by specific laws and regulations that apply specifically to cooperatives, such as the Cooperative Corporations Act in Canada or the Cooperative Associations Act in the UK.

What types of businesses can be organized as cooperatives?

Cooperatives can be organized in a variety of sectors, including agriculture, retail, financial services, healthcare, housing, and worker-owned businesses.

Can cooperatives be successful and profitable?

Yes, cooperatives can be successful and profitable. In fact, many cooperatives are able to achieve financial stability and long-term sustainability because they are owned and controlled by the people who use their services or products. This alignment of interests can lead to increased efficiency and motivation to innovate.

How do cooperatives contribute to the local community?

Cooperatives often contribute to the local community by providing goods and services that meet the needs of the community, creating jobs and economic opportunities, and contributing to the overall economic development of the area. In addition, cooperatives may be more likely to prioritize the needs of the community over profits, as the members of the cooperative are also the consumers of its products or services.

Can cooperatives be organized on a regional or national level?

Yes, cooperatives can be organized on a regional or national level. In fact, some cooperatives are organized as federations, which are networks of cooperatives that operate at different levels and in different sectors. Federations can provide support and resources to member cooperatives, such as training and technical assistance, and can advocate for the interests of cooperatives at the regional or national level.

How do cooperatives address social and environmental concerns?

Cooperatives may prioritize social and environmental concerns as part of their mission and values. For example, a cooperative might prioritize fair labor practices, environmentally sustainable business practices, or community development projects. Members of the cooperative may also have the opportunity to shape the cooperative’s social and environmental priorities through the democratic decision-making process.

Can cooperatives provide employment and career opportunities?

Yes, cooperatives can provide employment and career opportunities for their members and for people in the local community. In fact, many cooperatives are organized as worker-owned businesses, in which the employees are also the owners of the cooperative. This structure can provide employees with greater control over their working conditions and opportunities for advancement.

How do cooperatives benefit their members?

Cooperatives can benefit their members in a number of ways, including by providing access to goods and services at fair prices, by returning profits to members in the form of dividends, and by providing opportunities for member involvement and participation in the decision-making process. In addition, membership in a cooperative can provide a sense of community and belonging, and can give members a greater sense of control over their lives.

How can I start a cooperative?

Starting a cooperative requires careful planning and a clear understanding of the needs and goals of the members. Some steps to consider when starting a cooperative include:

• Identify the needs and goals of the members: What goods or services does the cooperative plan to offer, and how will it meet the needs of the members?
• Develop a business plan: A business plan will help to define the structure and operations of the cooperative, including how it will be financed, how it will be governed, and how it will generate income.
• Recruit and organize the members: Members are the foundation of a cooperative, so it is important to identify and organize the people who will be involved in the cooperative from the outset.
• Incorporate the cooperative: This involves registering the cooperative as a legal entity and obtaining any necessary licenses and permits.
• Establish governance and management systems: This includes setting up a board of directors and other necessary committees, and developing policies and procedures for the operation of the cooperative

What challenges do cooperatives face?

Cooperatives can face a number of challenges, including:

• Lack of capital: Cooperatives may struggle to raise the capital needed to start or expand their operations.
• Competition from traditional businesses: Cooperatives may face competition from traditional businesses that have greater access to capital and other resources.
• Limited access to credit: Cooperatives may have difficulty obtaining loans or other forms of credit from traditional financial institutions.
• Difficulty in attracting and retaining members: Cooperatives may struggle to recruit and retain members, particularly if they are not meeting the needs of their members or if there is a lack of awareness about the benefits of membership.
• Governance issues: Cooperatives may face challenges related to governance, such as conflict among members or difficulties in achieving consensus on key issues.

How can cooperatives overcome these challenges?

Cooperatives can overcome these challenges by:

• Building a strong member base: Cooperatives can attract and retain members by meeting their needs and demonstrating the value of membership.
• Developing a solid business plan: A well-thought-out business plan can help cooperatives to secure financing and to better understand and address potential challenges.
• Seeking out alternative sources of financing: Cooperatives can explore alternative sources of financing, such as crowdfunding or peer-to-peer lending, in addition to traditional sources like banks and credit unions.
• Building partnerships and collaborations: Cooperatives can build partnerships and collaborations with other cooperatives, businesses, or community organizations to share resources and expertise and to increase their collective impact.
• Seeking out technical assistance and support: Cooperatives can seek out technical assistance and support from organizations that specialize in supporting cooperatives, such as cooperatives development centers or cooperative federations.

How can I learn more about cooperatives?

There are a number of resources available to learn more about cooperatives, including:

• Cooperative development centers: Many countries have organizations that specialize in supporting the development and growth of cooperatives. These organizations can provide training, technical assistance, and other resources to help cooperatives succeed.
• Cooperative federations: Cooperative federations are networks of cooperatives that operate at different levels and in different sectors. Federations can provide information and resources to help cooperatives understand and address the challenges they face.
• Online resources: There are many websites and online resources that provide information and resources on cooperatives, including cooperative directories, research and publications, and educational materials.
• Books and articles: There are a number of books and articles available on cooperatives, including histories of the cooperative movement, case studies of successful cooperatives, and analyses of the principles and practices of cooperatives.

Are there resources available to help cooperatives succeed?

Yes, there are many resources available to help cooperatives succeed, including cooperative development centers, cooperative federations, online resources, and books and articles on cooperatives. Cooperatives can also seek out training and technical assistance from these organizations and resources to help them build the skills and knowledge they need to succeed.