By. Ava Madison

More and more these days, we hear the term “cooperative” whether it is in the national health care debate or in regards to medical marijuana dispensaries.  Though the term is commonly known to mean “working together”; in business a cooperative refers to a specific structure, while still leaving mobility and wiggle-room to the entity itself. But what does this really mean?  Mostly self-governing, a cooperative is intended to work out a cost-effective, social approach to new industries by entrepreneurs in that industry, and provide a product or service otherwise not available to people who would benefit from it.  But isn’t that what any business does?  Let’s take a closer look at cooperatives, their history, their structure, importance, and what makes them different from other businesses.  We’ll also check out what it takes to start your own cooperative or how to join one.

What is a Cooperative?

A cooperative is defined as an autonomous association of persons united by their own will to meet their common economic, social, and cultural needs and aspirations through a jointly owned, democratically controlled enterprise.  Cooperatives adhere to a set of values and conduct that differs from usual businesses. Although cooperatives, like many other businesses, are formed to fill a need, they are not necessarily profit-driven. They are often designed to encourage self-help, training, education, self-responsibility, democracy, equality, equity and solidarity.  In addition, cooperatives have open ‘at will’ memberships. They rely on members’ economic participation, are autonomous and independent, and generally cooperate with other cooperatives. In addition, there is the utmost concern for, and interest in, the community.

For cooperatives or any entity to function, there must be a management structure to handle daily activities and various elements to ensure success. The requirements of cooperative management are clearly defined by law and include classes of members who form some sort of board, officers, administrative, and general members.  More classes can be divided or added in order to fulfill other jobs, tasks, responsibilities, or benefits.  All classes share the common purpose of the cooperative of which they are a part.

There are a number of ways to govern cooperatives and utilize those member-classes; the most common being retail, worker and consumer cooperatives.  Retailers’ cooperatives are businesses that pool together to get bulk discounts for their patrons and increase advertising opportunities.  A worker cooperative consists mainly of producers for their cooperative, and should be funded by them, though other classes must sometimes be involved for feasibility.  A consumers’ cooperative is run by its customers who vote on major decisions and elect the board.  Aside from governance structure, there are industry-specific cooperatives such as agricultural, banking, housing, building, and utilities.  These industries formed cooperatives to pool resources, utilize members’ expertise, concentrate strengths, reduce costs, or provide benefits otherwise unknown.

Why a Cooperative?

People have been working cooperatively since the beginning of time, however, cooperatives as businesses are just a few hundred years old.  Cooperatives were set up by workers, broke and unemployed, who serviced their communities by providing quality goods at a great rate, thus benefiting the members themselves.  Considered the first successful cooperative, the Rochdale Society of Equitable Pioneers formed in 1844 with 28 members, each of whom struggled four months to contribute one pound sterling to open shop.  They began with a little bit of butter, sugar, oatmeal, and a few candles; yet within months expanded to begin carrying tea and tobacco as well.  Consumers quickly came to know the Rochdale Society of Pioneers as a cooperative of unadulterated goods of impeccable quality.

Setting up a Cooperative

Now that we know what a cooperative is, why they exist, and what they’re used for, let’s look at how to create one.  The first thing to do when considering a cooperative is to identify what problem you will address.  Once accomplished, host a meeting and invite like-minded individuals to pool ideas and resources.  During this meeting discuss potential markets, outline tasks, and forecast an operating budget.  At this point, determine the cooperative’s feasibility and implement a plan to meet the needs necessary to begin.

Capital for a cooperative should be gathered from the members or a cooperative can enter into agreements on behalf of its members for products, services, funds, and other things.  Once a source of funding is recognized and capital is established, you may move forward with your plan.

Unlike collectives, cooperatives must be formal and conform to the laws that govern their creation. It may be best to consult an experienced attorney and do your own research before starting a collective.

Establishing a location or an avenue to conduct business is next.  This varies case by case depending on what exactly you’re doing.  Your establishment should fit your cooperative and vice versa.

So you have a purpose, gathered initial members, raised money, found a place, and have all your paperwork.  Next you want to appoint or hire a manager to carry out the day-to-day activities of the cooperative.  After that, it’s time for a membership drive to expand and create new opportunities.

Running a Cooperative

Your cooperative is up and running.  Your producer class is doing great and your general consumer class is expanding.  More members provide an avenue for offering more services. Although day-to-day decisions and operating procedures can be tackled by a single person, company decisions must come from among the members.  Hold a regular board meeting, establish voting procedures & policies, and implement actions consistent with cooperative values. To stay compliant, all businesses must adhere to all applicable local, state, and federal laws. Cooperatives especially must inform and engage your membership, as well as contribute back to the community.

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