Another is that all or most of the directors must be members of the cooperative. Thus, the leaders are regular users of the firm's products or services. Equity comes from the members, rather than outside investors. It is obtained by direct contributions through membership fees or sale of stock, by agreement with members to withhold a portion of net income based on patronage, or through retention of a portion of sales proceeds for each unit of product marketed. The allocations may be distributed in cash or retained as additional equity.
Members usually receive a combination of cash and an allocation of equity.
Earnings from business with members are taxed once, either as income of the corporation when earned or as income of the members when allocated to them. A cooperative usually has a perpetual existence. Members can routinely join or resign without disrupting ongoing operations.