About Cooperatives

Cooperatives are a type of business corporation established under California law. Agricultural cooperatives are incorporated under the California Food and Agricultural Code (Section 54001 et. seq). Other types of cooperatives are usually formed in accordance with the California Corporations Code under provisons known as the Consumer Cooperative Corporation Law (Section 12200 et. seq.).

Unlike the ordinary corporation the cooperative corporation exists only to serve as an agent for its member owners. Through their membership in the cooperative, the members are in the business of serving themselves. They are both owners and users of the cooperative's services. The primary objective of the cooperative is to provide benefits to its members rather than a return on member's capital investment.

Agricultural Cooperatives.  An agricultural co-op is organized to make a profit only for its members as producers of agricultural products, not for itself as such or its members as such.  An agricultural "product" includes any horticultural, vitacultural, aquacultural, forestry, dairy, livestock, poultry, bee, or farm product.  The co-op may engage in any activity connected with the production and marketing of its products, or with the purchase, use, or financing of supplies or equipment.  The co-op may make marketing contracts with its members that require members to sell all or part of their products exclusively to or through the association.  The association may establish reserves, commonly structured as "Revolving Funds", and invest the funds from the reserves.  An agricultural association may be organized with or without shares of stock.  Most agricultural co-ops are organized without stock so that the property interests of members will be tied solely to the members' contribution to production. (Source, Mathew Bender & Co., Inc.)

Consumer Cooperatives.  A consumer co-op may be formed for any lawful purpose, provided that it is organized and conducts its business primarily for the mutual benefit of its members as patrons of the corporation.  If the co-op is organized to provide goods or services to its members, its "patrons" are those who purchase those types of goods from, or use those types of services of, the corporation.  If it is organized to market, process, or otherwise handle its members' products or services, its "patrons" are those persons whose products or services are marketed, processed, or handled by the co-op.  Although these organizations are termed "consumer cooperatives", there is no requirement that their members must actually be "consumers".  Consumer co-ops are democratically controlled and are not organized to make a profit for themselves or for their members.  Rather, they are operated primarily for the mutual benefit of their members as patrons.  The earnings, savings, or benefits of the co-op must be used for the general welfare of the members, or must be proportionately and equitably distributed to some or all of its members or patrons, based on patronage in the form of cash, property, evidences of indebtedness, capital credits, memberships, or services. (Source, Mathew Bender & Co., Inc.)