| How Cooperatives Work Cooperatives share certain traits that distinguish them from other businesses. Here’s what you need to know about the cooperative system. What is a cooperative? Cooperative Plus Inc. is a business owned and democratically controlled by the people who use its services. 
How do members benefit from a cooperative?Members benefit in two ways, based on how much they use the cooperative. First, the more they use the cooperative, the more service they receive. Second, earnings are allocated to members based on the amount of business they do with the cooperative. Without the cooperative, these funds would go to other middlemen or processors. How is a cooperative different from other businesses? Compared to other businesses, cooperatives have open membership and are based on a system of one member, one vote. How does the user-control principle work? As owners, a cooperative’s members control its activities. This control is exercised directly through voting at annual meetings and indirectly through members elected to the board of directors. What is the patronage refund system? Cooperatives strive to return earnings to members, but this is not done on a transaction-by-transaction basis. Instead, cooperatives usually charge market prices for supplies and services furnished to members and competitive prices for products delivered for further processing and marketing. Normally, this allows them to generate sufficient income to cover costs and meet continuing needs for operating capital. At the end of the fiscal year, a cooperative computes its earnings on business conducted on a cooperative basis. Those earnings are returned to the patrons—as cash and/or equity allocations—on the basis of how much business each patron did with the cooperative during the year. These distributions are called patronage refunds. |
