What is a Cooperative Business Model?

What is a Cooperative Business Model in Ohio

If you are thinking of starting a business (whether for profit or nonprofit) in Ohio or have an existing business and are exploring options to retire but let your business live on, it is important that know about cooperative business models.  A cooperative or coop structure may or may not be the ideal legal entity for your enterprise. Fortunately, if a cooperative model is right for your business, Ohio has notably good, flexible laws that support the creation of cooperative enterprises.

Much has been written about cooperatives and they have been around a long time. Initially at the turn of the century in the US farmers came together to form cooperatives.  Individual family farms would pool their resources to accomplish things or buy things that they could not afford on their own — for instance, electricity.  In fact, farmer cooperatives were responsible for bringing electricity to much of rural America. This is an example of a cooperative model where the members are farm businesses that come together to accomplish something together that would be more expensive or difficult on their own. 

There are at five different types of cooperative business models you can chose from in Ohio.  Each of these types of cooperative models will be discussed in separate blog articles.  However, a starting point for learning about cooperatives is knowing what seven principles guide all cooperative models whether you form in Ohio, another state, or internationally.

The 7 Guiding Principles of Cooperatives:

1. Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all people able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

2. Democratic Member Control

Cooperatives are democratic organizations controlled by their members – those who buy the goods or use the services of the cooperative – who actively participate in setting policies and making decisions.

3. Member Economic Participation

Members contribute equally to, and democratically control, the capital of the cooperative. This benefits members in proportion to the business they conduct with the cooperative rather than on the capital they invested.

4. Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If the coop enters into agreement with other organizations or raises capital from external sources, it is done so based on terms which ensure democratic control by the members and which maintain the cooperative’s autonomy.

5. Education, Training, and Information

Cooperatives provide education and training for members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.

6. Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, regional, national, and international structures.

7. Concern for Community

While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members.