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LESSON L060008: COOPERATIVES AS UNIQUE CORPORATIONS
Objectives
1. Compare and contrast the distinguishing
characteristics of corporations and
cooperatives.
2 Compare and contrast the advantages and
disadvantages of corporations and cooperatives.
Terms
•Cooperative
•Corporation
•Dividends
•Patronage payments
•S corporation
•Shareholders
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Corporations and cooperatives
A. A corporation is a business that is treated as a
single entity, yet it is owned by several people.
1. The corporation is treated as a single
entity; it can own property.
 2. The corporation is owned by
shareholders —people who own stock
in the company.
 3. Capital is raised by selling shares of
stock.
 4. The corporation is separate from the operator.
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5. Different classes of stock may be sold.
6. The corporation is taxed as a legal
entity.
7. The corporation pays dividends (a
share of the profits) to the shareholders
to distribute profits.
8. A sub-chapter S corporation is a
special type of corporation.
 a. Stock is limited to one class.
 b. No more than 75 shareholders are
allowed.
 c. It is taxed like a partnership.

B. A cooperative is a business organization where
the owners are the customers.
1. Cooperatives emphasize member
control.
 2. Members with a mutual interest
organize cooperatives.
 3. Cooperatives are operated on a
non-profit basis.
 4. Patronage payments are the
profits paid to members based on their use of the
cooperative.
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5. Membership is voluntary.
6. Most cooperatives operate
on a one-member, one-vote
basis.
7. Its members elect the
board of directors, which is
composed of cooperative members.
8. Cooperative stock does not increase or decrease in
value.
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
Advantages and disadvantages
of corporations and
cooperatives
A. Agricultural corporations
have numerous advantages.

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1. Raising capital is easier in corporations than in
partnerships and sole proprietorships.
2. There is a separation between ownership and
management.
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3. The business continues smoothly, regardless of illness
or death.
4. Ownership is easily transferred.
5. The liability of owners is
limited to the stock purchased.
6. Corporations provide a good
way to pool the resources of
numerous individuals.

B. A cooperative offers
numerous advantages to its
members.

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1. The cooperative’s philosophy
centers on member services.
2. Liability is limited to the amount of the investment.
3. Numerous people pool their resources to start the
cooperative.
4. All members share control of the business; no one or
two people can control the company.
5. A long life of the cooperative is likely.

C. A corporation may pose several disadvantages.
1. Organizing a corporation can be complicated and
costly.
 2. Corporations usually have
additional bookkeeping and
accounting costs.
 3. Freedom of actions and
changes to the business
are limited.
 4. It is expensive to end the business.
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5. There are considerable legal
aspects to consider.
6. Double taxation may occur; the
corporation’s income is taxed, as is
the dividend paid to stockholders.
7. It may be less of a personal
business.

D. Very few disadvantages of a
cooperative are apparent.

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1. Legal formalities can be
numerous.
2. A large share of ownership is
impossible.
3. Management of the business is
limited to the general manager.
REVIEW
•What are the characteristics of a
corporation and a cooperative?
•What are the advantages of a
corporation and a cooperative? What are
the disadvantages of a corporation and a
cooperative?