What is a Cooperative?

A cooperative is a business with some special attributes. For example, the governance structure of cooperatives is significantly more open, democratic, transparent and inclusive than that of for-profit businesses.

A recent national survey indicates that the public views businesses with the cooperative governance characteristics as more trustworthy than businesses that lack these attributes.

Learn more about the five types of cooperatives, the business or industry sectors in which cooperatives operate, and the Seven Cooperative Principles.

What is a Cooperative Business?

Cooperatives can be formed for individuals, businesses or communities and all are defined by these attributes:

• It is owned and democratically controlled by its members—the people who use the cooperative's services or buy its goods—not by investors.
   
• A cooperative returns surplus revenues (income over expenses and investment) to members proportionate to their use of the cooperative, not proportionate to their ownership share.
   
• A cooperative business is motivated by service to their members, not by profit.
   
• Cooperatives pay taxes on income kept within the co-op for investment and reserves. Surplus revenues from the co-op are returned to individual members who pay taxes on that income.

Five Types of Cooperatives

There are five types of cooperatives:

• Consumer
• Producer
• Worker
• Purchasing/Shared Services
• Hybrid

Cooperatives by Sector

A cooperative sector refers to the industry in which the cooperative operates. Co-ops are found throughout the economy, but there are 13 industries or sectors where the cooperative business model is most heavily used.