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Perks and snags of small business cooperatives

By Samantha Garner | July 5, 2014

Cooperative small businesses are organized and controlled by members – an association of people who strive to meet common needs. There are approximately 8,800 cooperatives in Canada. If you’ve shopped at a Co-op grocery store, well, it shouldn’t surprise you to learn that it’s a cooperative organization.

Members pool resources and are given one vote per member. Membership is open and voluntary and members get regular patronage dividend payments. There are two operations of the cooperative: general meetings of the members or delegates; and the board of directors elected at a general meeting. Users or stakeholders of the cooperative usually include consumers, producers, workers or multi-stakeholders.

Here are some perks and snags of a cooperative business:

Perks

  • Limited liability.
  • Profit distribution in proportion to use of service.
  • One member, one vote (democratic control).
  • Owned and controlled by members.
  • Ability to respond to community needs.
  • Community development in remote areas can be stimulated as a spin-off from a cooperative activity.
  • The survival rate of co-ops is higher than private sector companies.
  • Life of the company doesn’t end with the death of a shareholder.

Snags

  • It takes longer to make decisions.
  • Record keeping requirements are extensive.
  • There is less incentive to invest additional funds – members having the larger investment have no advantages over smaller contributors.
  • Conflicts may develop between members.
  • Members must participate for success.

Want more perks and snags? Check out our earlier blog posts on:

 

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