Difference between Cooperatives and Corporations

 

Key difference: A cooperative is a group of people who come together and voluntarily cooperate for their mutual, social, economic, and cultural benefit. A corporation is a separate legal entity, which is owned by shareholders. It has legal rights and liabilities, and may work for profit or not for profit.

 

A corporation and a cooperative are both entities formed with the intention of doing business. However, they have very different structures. First and foremost, a cooperative is a non-profit, as in it doesn’t keep any of the profits for itself. It distributes all of the profit among its members. It might not even make any profit at all, and instead just provide benefits and services to its members.

 

A corporation, on the other hand, is a separate legal entity, which is owned by shareholders. It has legal rights and liabilities, and may work for profit or not for profit. It is usually created with the intention of making profit. The profit is first reinvested in the corporation and then among the stockholders in the form of dividends, as decided by the president of the corporation. The corporation is a separate legal entity, and the blame does not fall on the stockholders, but on the corporation itself and possibly on the board of directors.

 

A cooperative is a group of people who come together and voluntarily cooperate for their mutual, social, economic, and cultural benefit. It is operated for the benefit of those using the cooperative’s services. In a cooperative, every customer is a member and every member is a part owner. Cooperatives share internationally agreed principles and act together to build a better world through co-operation.

The cooperative aims to meet the common needs and aspirations of its members, by sharing ownership and making decisions democratically. The cooperative is owned and operated by the group of members who all share equal responsibility, duties and profit. All the decisions are taken democratically, by one vote per member. Leaders, such as Chairman, Secretary, or Treasurer may be appointed from the members by popular vote.

 

One can say that the cooperatives are analogous to socialism, as they work for the mutual and beneficial good, whereas, corporations are analogous to capitalism, where they only work for profit and gain.

 

A detailed comparison between cooperatives and corporations:

 

 

Corporation

Cooperative

Definition

A legal entity which is separate from its owners.

An association of persons who voluntarily cooperate for their mutual, social, economic, and cultural benefit.

Ownership

Stockholders

Members (including customers, employees or residents) No member may but the share of another.

Formed

Formed under operational state laws with Articles of Incorporation.

Formed by group of people acting together to meet the common needs and aspirations of its members. Should be registered.

Types

subchapter-s corporation, professional corporation

Retailers' cooperative

Worker cooperative

Volunteer cooperative

Social cooperative

Consumers' cooperative

Business and employment cooperative

New generation cooperative

Housing cooperative

Utility cooperative

Agricultural cooperative

Credit unions and cooperative banking

Federal or secondary cooperatives

Management

Run by a board of directors

Run by members democratically or by elected officials

Structure

Members of a corporation have to act in accordance with the corporation's charter. More structured, less flexible. Easier to transfer ownership of part of a corporation.

Based on the cooperative values of "self-help, self-responsibility, democracy and equality, equity and solidarity" and the seven cooperative principles:

  1. Voluntary and open membership
  2. Democratic member control
  3. Economic participation by members
  4. Autonomy and independence
  5. Education, training and information
  6. Cooperation among cooperatives
  7. Concern for community

Raising money

By sale of financial instruments like stocks and bonds.

Member investments

Liability

The stockholders are not held responsible in case of a fault, the corporation is.

Based on cooperative structure as decided by regional cooperative law. May be unincorporated associations or business corporations such as limited liability companies or partnerships.

Dissolution

Stockholder approval, government approval

Member approval by equal voting.

 

 

Image Courtesy: angelabyrnecma.com
Image Courtesy: unmultimedia.org

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Comments

Hmmm it really cool and straight forward and easy 2 understand.

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