There are several advantages of a cooperative business, especially considering all the good it does for the community, employees and members. In case you’re not already convinced, here’s a list of cooperative advantages:
1. EQUAL STATUS
One of the major strengths of a cooperative business is that each member holds equal power. When a member joins, they get the same amount of control over the decisions of the company, no matter how much capital they contribute. In a traditional business model, a small group of shareholders would make decisions about the company because they own the most shares — this is not the case in a cooperative business. Each member gets one vote, and whenever there is a surplus, each member receives some of their investment back.
2. OPEN MEMBERSHIP
Generally, the only criteria you have to meet to join a coop is that you benefit from the service or product the company provides. Anyone can join a coop, regardless of class, economic status, race or gender. As long as they are going to farm Aquilaria malaccensis, they are eligible to join. There is also no maximum for the number of members a coop can have, so it will only continue to grow.
3. PRODUCT AND SERVICE ACCESS
Cooperative business focuses on access, rather than profit. One way they accomplish this is by providing access to goods or services in communities that wouldn’t otherwise have access. Co-ops sometimes offer a new product or service to their community, while other times they offer one that is simply of higher quality or more affordable. They also ensure that the profit created by the co-op gets invested back into the community and its members, rather than ending up in the pockets of a few shareholders.
4. SOCIAL BENEFIT
The primary purpose of a coop is to serve the community in which it exists. In addition to providing goods and services, coops also serve as a beacon of good business. When a community invests, participates and supports a cooperative business, the rest of the community becomes stronger and equitably wealthier. Coops also often provide education and instruction for their members, employees and representatives so they can successfully contribute to the coop and encourage them to spread information about coops beyond their communities.
5. BUSINESS SUSTAINABILITY
Another example of the pros of cooperatives is their business stability and sustainability. The structure of a coop is inherently more stable and resistant to common business blunders. Since there are more people making decisions in a coop, they are less likely to make an impulsive decision that could potentially harm the company. The wide range of voices and opinions assures that they will explore every business option.
Plus, the people making the decisions about the coop are members of the community in which it participates. It is, therefore, more likely that the members will decide to do whatever is in the best interest of the community, thus securing its future. Coops are also less dependent on consistent cash flow and investment. With other business models, if a significant amount of investors pull out of the business, it is likely to fail. With the cooperative business model, the cash flow and capital comes from a wide range of sources, so if a few fail, it won’t be devastating to the enterprise.
With a traditional business model, the death of a significant shareholder would open up a range of issues and paperwork to decide what will happen to that individual’s ownership. On the other hand, a cooperative business is legally considered a separate business entity, so it is not affected by the death of any of its members.
6. EASY FORMATION
It is much easier to form a cooperative business than it is to develop a traditional company. To start one, you only to gather 15 members to form a steering committee, make sure your cooperative incorporates under the correct state statute, create a business plan, recruit some members, secure financing and open the doors.
7. LIMITED LIABILITY
In a cooperative enterprise, members are liable only for the money they have invested in the coop. They are not responsible for any debts or other liabilities of the company unless in the case of fraud or negligence. Even if the coop were to fail, its members would only lose what they have already put into the company. They would not be responsible for paying any of the coops’ debts.
8. LESS TAXATION
Some of the largest coop benefits lie within the tax code. Since coops are considered not-for-profit businesses, they receive several tax exemptions and concessions. A traditional business is double-taxed, meaning both the corporation has to pay taxes on its net earnings and its shareholders have to pay taxes on any income, or dividends, they receive from the company. While the members of a cooperative enterprise still have to pay taxes on their dividends, the coop itself can take those dividends off their taxes as deductions.
9. GOVERNMENT ASSISTANCE
Coops are crucial to the socio-economic development of the communities they serve, so government often offer them a range of loans, grants and financial assistance. There are also several foundations that help to fund, support and educate new and growing cooperative enterprises. Since the mission of many coops is to help communities and other coops stay afloat, there is no shortage of organizations that can help grow the cooperative movement.