2017-03-08 00:00:00 Starting a Business English Discover what makes a cooperative different from a regular for-profit business and how you can actually earn money by paying for goods or... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Man-and-woman-on-farm-business-cooperative-hold-eggs-and-a-rooster-near-garden.jpg https://quickbooks.intuit.com/ca/resources/starting-business/what-is-a-cooperative/ What Is a Business Cooperative?

What Is a Business Cooperative?

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

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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