Benefits of a Cooperative
June 24, 2024
By: Matthew Taboni
Are you looking to start a new business focused on addressing a need in your community, but aren’t sure which model is the right fit? Cooperatives might be the solution you are looking for. Cooperatives offer a unique business structure that can support a wide range of business ambitions across almost every industry.
What are cooperatives?
Generally, a cooperative is a member-owned and controlled business entity that renders mutual help and service to its members. Cooperatives have been around since the 1800s in many different forms and, currently, about fifteen different cooperatives call WNY home. Some well-established national cooperatives, you may be aware of, include Land O’Lakes, REI, and Welch’s – comprised of 670 family-farmers, many just outside of the Western New York region. At the core of every cooperative is democratic management with each member maintaining one vote.
All cooperatives function with seven principles:
- Voluntary and Open Membership
- Democratic Member Control
- Member's Economic Participation
- Autonomy and Independence
- Education, Training, and Information
- Cooperation Among Cooperatives
- Concern for Community
While NYS has codified four separate cooperative models, the main two cooperative structures are consumer cooperative and worker cooperatives.
Consumer Cooperatives
Consumer cooperatives are enterprises owned by the consumers and managed democratically for the mutual benefit of the consumer. The mutual benefit is often seen through lower costs or greater access to goods. The most familiar consumer cooperatives are credit unions and grocery stores, such as Buffalo’s own Lexington Co-op. With less focus on earning profit, consumer cooperatives exist to meet community needs, while still functioning like a for profit business model.
Worker Cooperatives
Worker Cooperatives are for profit entities whose employees govern the business as a democracy. In a worker cooperative each worker-owner has one vote and equal stake in the company. While worker cooperatives function more similarly to an LLC or corporation, they return all their profits directly to their members and focus on making decisions that are best for the community rather than just the shareholders. Some local worker cooperatives include Farmer’s Pirates and Extra Extra Pizza.
Benefits of a Cooperative Model
Both consumer and worker cooperatives have many benefits for the community and their members. Cooperatives are inherently more stable and resistant to common business challenges due to shared decision making. Even though they are not true non-profits, NYS classifies consumer cooperatives as not-for-profit businesses, and they often receive tax exemptions and concessions. Food co-ops, specifically grocery stores, invest on average $1,604 back into the local economy for every $1,000 spent in store. In worker cooperatives employees have reported higher levels of job satisfaction and have a 35% less turnover rate than industry averages. These are just a few of the many benefits a cooperative business can experience.
More than ever, cooperatives are addressing community needs while serving as an economic fixture for their members and owners. If you are interested in starting a new cooperative or transitioning your existing business into one give me, or any member of our Business and Corporate Law team, a call.
Matthew Taboni is a law clerk with Gross Shuman P.C. He can be reached at 716-854-4300 or mtaboni@gross-shuman.com.
