Rural Development / Cooperative Information Report (CIR) 54

Do Yourself a Favor

 Join a Cooperative
Do Yourself a Favor

 Join a Cooperative

Editor’s note: This publication was originally produced in 1996 by Donald 

A. Frederick, then the program leader for the Law, Policy & Governance 

Division within the Cooperative Programs office of USDA’s Rural BusinessCooperative Service. It was updated in 2018 by Dan Campbell, co-op 

publications editor, and James Wadsworth, ag economist and program leader 

of the Co-op Education Division. 

On the cover: This photo collage represents the wide scope of needs cooperatives 

meet across the nation. Left to right, from the top:

 Row 1: Co-ops support young and beginning farmers in many ways, including 

on-farm internships; Dairy co-ops handle 85 percent of the Nation’s milk; Co-ops are 

major developers of wind and other renewable energy sources; 

 Row 2: Nearly 1,900 farmer-owned co-ops generate $200 billion in annual sales; 

Worker co-ops are active in many sectors, including providing home care for seniors 

and disabled people; Food co-ops can be owned by consumers, workers, or a 

combination thereof. 

 Row 3: Credit unions and Farm Credit associations are co-ops owned by memberborrowers; Many manufactured home owners have formed co-ops to buy and 

control their community property; rural people rely on utility co-ops to provide power 

and telecommunications services, including broadband.

Do Yourself a Favor: JOIN a Cooperative

United States Department of Agriculture

Rural Development

Rural Business-Cooperative Service

Cooperative Information Report (CIR) 54

U.S. Department of Agriculture

1400 Independence Ave., SW, STOP 3254

Washington, D.C. 20250-3254

https://www.rd.usda.gov/programs-services/all-programs/cooperative-programs

2 DO YOURSELF A FAVOR: JOIN A COOPERATIVE
For more than 200 years, Americans have worked together in 

business cooperatives to meet critical challenges and to solve problems that 

were too big for them to overcome as individuals. Today Americans of every 

type and occupation belong 

to nearly 31,000 cooperatives 

nationwide. These include: 

farmer co-ops that help 

producers process and market 

their crops and livestock and 

provide them with essential 

farm supplies and services; 

rural utility co-ops that 

provide their consumermembers with electricity, 

telecommunications services 

and water; financial services 

co-ops and credit unions, 

grocery co-ops and a wide 

array of retail operations, such as hardware and building supply co-ops, 

among others. Worker co-ops are also gaining in popularity in areas such 

as home care services for seniors and people with disabilities, and in some 

processing and retail sectors. U.S. cooperatives generate some $650 billion 

in annual revenue and create about 2.1 million jobs.

This pamphlet shows how you can use a cooperative to increase your 

income and better control your future. It focuses on the unique aspects of 

doing business and providing services on a cooperative basis and the special 

benefits that cooperative members enjoy.

DO YOURSELF A FAVOR: JOIN A COOPERATIVE 3
Do Yourself a Favor

 Join a Cooperative 

What Is a Cooperative?

A cooperative is a business or service 

organization that has two unique 

characteristics. First, it is owned and 

democratically controlled by the people 

4 DO YOURSELF A FAVOR: JOIN A COOPERATIVE
who use its services. Second, the benefits (services received and earnings 

allocations) are distributed to the user-owners on the basis of how much 

they use the cooperative. A business or service organization that operates as 

a cooperative can help members achieve long-term prosperity and a better 

quality of life.

DO YOURSELF A FAVOR: JOIN A COOPERATIVE 5
6 DO YOURSELF A FAVOR: JOIN A COOPERATIVE

User Ownership and Control

The focus of non-cooperative, investor-owned businesses is strictly on the 

“bottom line,” or the highest profit. The stockholder-owners may never use 

the products their company produces. Their primary concern is increasing 

the value of their stock and/or dividend payments.

A cooperative takes a different approach. It is not owned and controlled 

by outsiders, but rather by the people who use its services regularly, often 

daily. While a cooperative has to cover its costs to stay in business, it can 

focus its resources on meeting the needs of its user-owners (usually called 

“members.”) Business decisions are made on the basis of what is in the 

overall best interests of the members. Each member maintains his or her 

status as an individual, and the cooperative becomes a means to realize 

business and personal goals. 

Co-op members exercise control of the business by:

1. Electing the co-op’s board of directors. The board of directors hires and 

oversees management. Management oversees the day-to-day operations 

of the business. Directors meet regularly to review business performance 

and set policy direction for the cooperative. Members elect directors from 

among their fellow member-users. As regular customers of the cooperative, 

directors have firsthand knowledge of its strengths and where improvement 

is needed. They have a personal stake in seeing that the business meets its 

goal of helping the members prosper. If directors are not doing a good job, 

members have the authority to elect someone else or even recall and replace 

directors during a term.

2. Approving co-op articles and bylaws. The articles of incorporation and the 

bylaws are legal documents that establish general rules for how a cooperative 

will be organized and operated. These include who can become a member, 

the number and method of electing directors, and how members will 

finance the cooperative. These legal documents are first adopted when the 
DO YOURSELF A FAVOR: JOIN A COOPERATIVE 7

cooperative is organized and can be amended at any time by a vote of the 

members.

3. Voting on major changes in the business. While directors oversee the 

general operation of a cooperative, the members usually must approve 

any change in its basic structure. This includes proposals to merge or 

consolidate, to form a joint venture with another cooperative or noncooperative firm, or to dissolve the cooperative. Members also sometimes 

vote on entering a major new line of business and on substantial 

investments, such as buying or constructing a new facility. Only the 

members can restructure a cooperative, sell it, or shut it down.

The way members of a cooperative vote is also different from an investorowned firm. In a non-cooperative business, people usually have voting 

power that reflects their equity investment. For example, shareholders in an 

investor-owned corporation have one vote for each share of common stock 

they own.
8 DO YOURSELF A FAVOR: JOIN A COOPERATIVE

In a cooperative, each member generally has only one vote regardless of 

the amount of equity owned. This one-member, one-vote approach makes 

cooperatives prime examples of democracy in action. Wealthy members 

can’t buy control, because all members have an equal say in how the business 

is conducted.

Benefits Accrue According to Use

People buy stock in a non-cooperative business to make money on 

their investment. The more of the company you own, the more benefits 

(stock appreciation and dividends) you will realize if the business succeeds. 

The benefits of being a cooperative member differ in two ways. First, the 

advantages are more numerous. Second, they are distributed on the basis of 

how much use you make of the cooperative, rather than your equity stake. 

Below are some of the benefits of cooperative membership.

1. Access to quality supplies and services at reasonable cost. 

By banding together and purchasing business supplies and services as 

a group, individuals offset the market power advantage of firms providing 

those supplies. You can gain access to volume discounts and negotiate 

from a position of greater strength for better delivery terms, credit terms, 

and other arrangements. 

Suppliers will be more willing 

to discuss customizing products 

and services to meet your 

specifications if the purchasing 

group provides them sufficient 

volume to justify the extra time 

and expense. 

 The larger the group 

purchasing supplies and services 

through the cooperative, the 

greater the potential for savings. 
DO YOURSELF A FAVOR: JOIN A COOPERATIVE 9

Further, the more members use the supply operation, the more they save 

over doing business elsewhere. Another option for cooperative members 

is to manufacture their own supplies and hire experts directly to provide 

essential services. This gives members even more reliable sources of supply 

and greater control over the types of products available, the cost, and the 

quality of the services received.

2. Increased clout in the marketplace.

Marketing on a cooperative basis, like purchasing supplies and services, 

gives members the ability to combine their strength while maintaining 

their status as independent business people. They can lower distribution 

costs, conduct joint product promotion, and develop the ability to deliver 

their products in the amounts and types that will attract better offers from 

purchasers.

A Federal law, the Capper-Volstead Act, provides farmers with an extra 

incentive to market cooperatively: a limited exemption from antitrust 
10 DO YOURSELF A FAVOR: JOIN A COOPERATIVE

liability for marketing agricultural products on a cooperative basis. Under 

this law, farmers can agree on the prices they will accept for their products 

and other terms of sale. 

Through cooperative marketing, members can share information and 

negotiate with buyers from a position of greater strength and security. They 

can also develop processing facilities by themselves or as part of a joint 

venture with other cooperative or non-cooperative firms. A cooperative can 

also serve as a vehicle for people selling goods and services to work with 

their customers to promote industry research, reduce regulatory burdens, 

and develop markets for their products. A cooperative can thus help create a 

“win-win” situation for the entire industry, creating a business environment 

where both producers and buyers derive more income and other benefits. 

3. Share in the earnings.

Some people talk about non-cooperative firms operating “for profit” 

while cooperatives operate “at cost.” This isn’t totally accurate. Most 

cooperatives generate earnings. Where they differ from non-cooperative 

firms is in how they allocate and distribute their earnings. A noncooperative firm retains its earnings for its own account, or perhaps pays 

part of them out to shareholders as dividends, based on the amount of stock 

each investor owns. In a cooperative, earnings are usually allocated among 

the members on the basis of the amount of business each did with the 

cooperative during the year. 
DO YOURSELF A FAVOR: JOIN A COOPERATIVE 11

Permitting their cooperative to accumulate retained patronage refunds is 

a relatively easy and painless way for members to help finance cooperative 

activities and growth. Also, if certain rules in the Internal Revenue Code 

are followed, the cooperative is permitted to deduct both the cash payouts 

and the retained patronage refunds from its taxable income. This makes 

cooperative earnings particularly valuable.

4. Political action.

Growers, small business owners, and other rural residents have to realize 

that no one gives you a favorable law or regulatory ruling just because you 

think you deserve it. You have to build your case and argue your point 

convincingly. A cooperative gives people a means to organize for effective 

political action. They can meet to develop priorities and strategies. They 

can send representatives to meet with legislators and regulators. These 
12 DO YOURSELF A FAVOR: JOIN A COOPERATIVE

representatives will likely have more influence because they will be speaking 

for many, not just for themselves.

Co-ops can also form coalitions or join trade groups with others having 

similar needs and views on issues. The larger the voice calling for a specific 

action, the more likely that the system will respond with the policy you 

desire. Some examples of such organizations are the National Council of 

Farmer Cooperatives, National Cooperative Business Association, National 

Rural Electric Cooperative Association and the Credit Union National 

Association, to name but a few.

5. Local economy enhanced and protected.

Owning and controlling a business on a cooperative basis helps your 

entire community. Cooperatives generate jobs and salaries for local 

residents. They pay taxes that help pay for schools, hospitals, and other 

community services.

When a business is a cooperative, your town is less likely to lose those 

jobs and taxes. A business owned by one person, or a subsidiary of a big 

company, can easily be moved to another community, State, or even be “offshored” to another country. When many local people share the ownership of 

a cooperative, no individual or company president can take it from your area 

or simply close it. Only the membership as a whole can make such decisions.

Why Not a Nonprofit?

Sometimes people confuse cooperatives with nonprofit associations. Or 

they think organizing as a nonprofit sounds appealing because they have 

heard that nonprofits are totally exempt from taxation and have easier access 

to grant funding.

Clear distinctions exist between nonprofit groups and businesses. 

Nonprofit laws and tax treatment are designed for charitable and civic 

organizations, such as the Red Cross and the Rotary Club. They are 

not appropriate for business ventures. For example, one of the main 

characteristics of a cooperative is that earnings are returned to patrons on 
DO YOURSELF A FAVOR: JOIN A COOPERATIVE 13

the basis of use. But in a nonprofit, all earnings must be retained in the 

organization and, upon dissolution, all assets usually must go to another 

nonprofit. Thus, operating as a nonprofit keeps members from sharing in 

the earnings of their business.

The Real Bottom Line

Cooperatives are not solutions in and of themselves. They are a means 

for people to achieve an honest day’s income for an honest day’s work, or 

to meet other social and economic needs. To succeed, they require capital, 

commitment, patience, and a membership willing to work together even if 

it means giving up a little individuality in the process. But the rewards — a 

higher income, access to better supplies and services at a fair price, a greater 

ability to control the fate of your business, stronger communities and a 

better quality of life, as well as the satisfaction of having solved problems — 

make it well worth the effort to join or start a cooperative. 

Other publications that can help 

you learn about cooperatives

The USDA Rural Business-Cooperative Service has more than 200 

publications about cooperatives, as well as more than 10 years of back issues of 

Rural Cooperatives magazine, posted on its website at: https://www.rd.usda.

gov/publications/publications-cooperatives. Many are also available in hard copy, 

free of charge. To place an order or ask a question about availability, contact us at: 

coopInfo@wdc.usda.gov, or call (202) 720-7395, or write: USDA Rural Business-
14 DO YOURSELF A FAVOR: JOIN A COOPERATIVE

Cooperative Service, 1400 Independence Ave. SW, STOP 3254, Washington, D.C. 

20250-32564. 

Some of the more popular publications that provide an overview of cooperatives 

and how to start a co-op include:

n Cooperatives 101: An Introduction to Cooperatives (CIR 55) — This report 

provides a comprehensive summary of basic information on the cooperative 

way of organizing and operating a business. It covers the nature and 

extent of the use of cooperatives, compares cooperatives to other business 

structures, explains the roles various people play in a cooperative, and 

discusses equity accumulation and income taxation.

n Co-op Essentials: What They Are and the Role of Members, Directors, 

Managers and Employees (CIR 11) — This guide (a companion publication to 

USDA’s “Co-ops 101”) provides essential information about cooperatives. 

It explains what cooperatives are, including their business structure and 

principles. It examines the responsibilities and roles of cooperative members, 

directors, managers, and employees.

n How to Start a Cooperative (CIR 7) — This guide outlines the process of 

organizing a cooperative business and provides information on the potential 

steps involved and some important aspects of co-op development. It 

presents the 12 steps involved in most cooperative development projects. 

A cooperative business is also briefly described, including its structure and 

basic principles. 

U.S. Department of Agriculture

Rural Business-Cooperative Service

1400 Independence Ave., SW, Stop 3257

Washington, D.C. 20250-3250
DO YOURSELF A FAVOR: JOIN A COOPERATIVE 15

In accordance with Federal civil rights law and U.S. Department of 

Agriculture (USDA) civil rights regulations and policies, the USDA, 

its Agencies, offices, and employees, and institutions participating in or 

administering USDA programs are prohibited from discriminating based on 

race, color, national origin, religion, sex, gender identity (including gender 

expression), sexual orientation, disability, age, marital status, family/parental 

status, income derived from a public assistance program, political beliefs, 

or reprisal or retaliation for prior civil rights activity, in any program or 

activity conducted or funded by USDA (not all bases apply to all programs). 

Remedies and complaint filing deadlines vary by program or incident. 

Persons with disabilities who require alternative means of communication 

for program information (e.g., Braille, large print, audiotape, American Sign 

Language, etc.) should contact the responsible Agency or USDA’s TARGET 

Center at (202) 720-2600 (voice and TTY) or contact USDA through the 

Federal Relay Service at (800) 877-8339. Additionally, program information 

may be made available in languages other than English.

To file a program discrimination complaint, complete the USDA 

Program Discrimination Complaint Form, AD-3027, found online at 

How to File a Program Discrimination Complaint and at any USDA office 

or write a letter addressed to USDA and provide in the letter all of the 

information requested in the form. To request a copy of the complaint form, 

call (866) 632-9992. Submit your completed form or letter to USDA by: (1) 

mail: U.S. Department of Agriculture, Office of the Assistant Secretary for 

Civil Rights, 1400 Independence Avenue, SW, Washington, D.C. 20250-

9410; (2) fax: (202) 690-7442; or (3) email: program.intake@usda.gov. 

USDA is an equal opportunity provider, employer, and lender.

 

Originally published: April 1996

Revised: November 2018
Rural Development

Rural Business-Cooperative Service

Cooperative Information Report (CIR) 54

Do Yourself a Favor Join a Cooperative