Cooperative Business Associations
What is a Cooperative Business Association?
A Cooperative Business Association is a type of business organization that is operated and owned by a group of individuals, for their own mutual benefit. Cooperative business associations exist mainly to provide some sort of economic service to its members. Also, cooperatives distribute profits to individual members rather than amassing corporate profit for the entity.
Cooperative associations are also called “associations” or “co-ops”. There are many different types of cooperative associations. A common form of a cooperative association is a cooperative housing association. Cooperative business associations are typically governed by state statutes. However, they may sometimes be inferred from the nature of the business organization even if no statute exists.
Co-ops may often be identified on the internet through the use of .coop domain names. Many business organizations will find cooperative associations to be an ideal formation, as they provide several distinct advantages for individual members.
How are Control and Benefits Distributed in a Cooperative Business Association?
There are a number of characteristics and features that are unique to cooperative business associations. They are often very different from other types of business formations such as a corporation.
In a cooperative business association, control is distributed equally amongst members, regardless of the number of shares that are held by each shareholder. Each shareholder is granted equal ownership rights and may exercise an equal amount of control in the association.
With regards to economic benefits and profit, profits earned by the cooperative are typically divided in a proportional manner. Profits are divided according to the level of participation by each individual member. This is different from distributions in a corporation, which are usually based on the amount of capital that each member had contributed to the company.
Are Cooperative Associations distinct Legal Entities that can be sued?
Yes- a business organization that incorporates as a cooperative association becomes a distinct legal entity. As such, the cooperative association may be sued as an entity.
In most cases, it is required that a statute exists allowing the co-op to be sued as an entity before a party can bring suit against it in a court of law. On the other hand, some courts allow a cooperative association to be sued as an entity even without a statute, for example by virtue of necessity.
Because cooperative associations are separate legal entities, they are authorized to hold, transfer, or encumber real and personal property interests in their own name. These rights to property transactions exist even for an unincorporated cooperative association.
Finally, cooperative associations will continue to function as a separate legal entity even if an individual member withdraws or is expelled from the association. Individual members who withdraw from the cooperative will not have any possessory interests in the collective assets until the association undergoes liquidation. Again, this indefinite continuity is different than with other business forms that may expire if an individual member withdraws (such as in some types of partnerships).
Do I need a Lawyer for Legal Issues regarding a Cooperative Business Association?
Cooperative business associations can be a beneficial type of business structure for many organizations. If you are involved in a co-op or are considering creating one, you may wish to speak with a business lawyer for advice and counseling. Your attorney will be able to assist you with document review and other tasks. An experienced lawyer can explain the laws of your individual jurisdiction that regulate cooperatives. Also, in the event of legal dispute, your lawyer can represent your interests in a court of law.
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Last Modified: 04-21-2011 11:43 AM PDT
