What You Should Know About Cooperatives

If you are getting ready to start up your own business but are not quite sure which business model will be right for you, then you might want to take a look at all of your options. There are traditional models, including sole proprietorships, corporations, and partnerships, and then there is the cooperative.

Cooperatives are basically businesses that are owned by several members that work together to reach common goals. This may be a good idea for you if you want to be able to have other people work with you and share their resources, expertise and experience. A cooperative ownership is basically where each member takes part in management and decision making.

Generally, a cooperative is formed when people decide to work with others in order to meet their business goals by combining monetary resources and availability. Consider the following types of cooperatives:

  • Producer cooperative- producers, including farmers and artisans, work as a team to market and distribute products.
  • Consumer cooperative- customers buy a share in the business in order to lower prices and increase the access to their goods.
  • Worker cooperative- a company is owned and managed by the employees, which gives them ultimate control of their business.

Much like other business structures, cooperatives have some advantages and disadvantages. You want to consider the pros and the cons of this structure.

Pros:

  • More control lies in the hands of people who actually use the products
  • There are added resources that can be used to help market the products and distribute them
  • More members help to bring in new ideas that will help make decision making easier
  • There is limited liability involved, which means the responsibility is shared among the members

Cons:

  • Slower decision making since it requires the votes of all members
  • Potential issues between members that can cause a disruptive environment
  • Increased record keeping required

Before deciding which business structure is right for you, you will definitely want to learn more about cooperatives.