What is a co-op?

Definition of co-op

A cooperative is an organization, enterprise, or business that is owned and controlled by the people who use its products, supplies, or services. While cooperatives vary in type and membership size, most are usually formed to meet some specific objectives of members, and are structured to adapt to member's changing needs. Co-ops are characterized by self-reliance and self-help.

The cooperative as an alternative form of business organization arose during the Industrial Revolution to promote the interests of less powerful members of society. Historically, groups of people with shared interests or common welfare at stake - such as farmers, producers, workers, and consumers - have discovered that they could accomplish more and wield more influence collectively than they could individually.

Cooperatives give members collective control. Because the members elect representatives to the board of directors and can participate in general membership meetings, members have voting power and control in the co-op's operation and policy making.

Cooperatives operate democratically - one person, one vote - through two bodies: general meetings of the members, and the board of directors. Each member's liability is limited to the amount of his or her share in the capital. Each member has only one vote regardless of his or her capital contribution.

General objectives of co-ops

Co-op members usually have a range of objectives or reasons for starting their cooperatives. Some cooperatives may provide multiple objectives for members while others are more specialized.

Regardless of the type, size, geographical location, or purpose, all cooperatives provide at least one of the following:

Improve bargaining power when dealing with other business

Combining the volume of several members leverages their position.

Reduce costs

Volume purchasing reduces the purchase price of needed supplies. Earnings of the cooperative returned to individual members lower their net costs.

Obtain products or services otherwise unavailable

Services or products that would not attract private business are often supplied by cooperatives.

Obtain market access or broaden market opportunities

Value added to products by processing. Offering larger quantities of an assured type and quality attracts more buyers.

Improve product or service quality

Value added to their products, competition, and improved facilities and equipment increase member satisfaction.

Increase income

Distribution of the cooperative’s earnings boosts the income of members.

Different types of co-ops

Because the cooperative structure can be used to address a multitude of shared needs, there are many different types, including: agricultural, arts and crafts, business, child care and preschool, credit unions, buying clubs, housing, insurance, retail, student, utility, and worker cooperatives.

There are more than 40,000 cooperatives in the United States. One of every four U.S. citizens belongs to at least one cooperative. Cooperatives provide housing, health care, and electrical, telephone, and electronic services. Members use purchasing cooperatives to buy food, consumer goods, and business, and production supplies. They provide transportation, credit, housing, recreational equipment, and facilities. Cooperatives also market and process members’ products.

CCEnergy is a blend of both retail and a buyer's cooperative. Retail cooperatives sell consumer goods and services to members who enjoy discounts, patronage refunds or both. Patronage refunds are a percentage of the total amount of money a member has spent on purchases over a specified period of time. These refunds come from the earnings of the cooperatives. In the case of CCEnergy, the goods are the PV systems and equipment we purchase on the behalf of our consumer members, however, solar professionals including designers and installer contractors are also part of our co-op. The services CCEnergy offers include: education, training, collaboration, system design, installation, permit facilitation, and incentive/loan program application and processing.

Business organization of co-ops

There are many ways to conduct business in the United States. On Main Street USA, the businesses have different names, different products, and different services. People can buy, sell, trade, borrow, insure, and conduct all kinds of business transactions. But, each business may differ based on:

who owns the business,
who controls the business,
who buys from the business, and
who gets the profit.

There are three basic business types:

• A proprietorship owned by one person who operates, manages, and receives the profits. This is the simplest and oldest business type.


• A partnership owned by two or more people who share proportionally in the risks, management, and the profits.


• A corporation of which there are two types: general and cooperative. Both usually have multiple owners, offer goods and services to customers, and use sound financial practices. They operate under state-granted articles of incorporation. Policy is set by a board of directors, while day-to-day business operations are the responsibility of a hired manager.

CCEnergy is the second type of of corporation, incorporated in the State of California. California considers a cooperative corporation to be a non-profit business entity becauese any co-op profits are redistributed to our membership. However, this does not mean that CCEnergy is a tax-exempt "nonprofit" organization according to the IRS. Read more information about the distinctions between co-ops and nonprofits.

Co-op funding

The cooperative's startup capital usually comes from cooperative shares or membership purchased by members. Members of CCEnergy make a nominal initial investment of $300, and also pay annual membership dues of $48 to cover the costs of periodic service and a subscription to the co-op newsletter.

The disbursement of co-op funds - in the context of established, overall co-op objectives - is determined by the board of directors with the approval of the general membership. If the co-op has a "surplus" at the end of the year, these funds may be distributed as follows:

1. Donations to other non-profit organizations
2. Patronage refund to purchasing members
3. Dividend to all members

These decisions are implemented by the co-op manager.

Read more about:

What Co-op Members Do
What Co-op Managers Do
What Co-op Directors Do

Sources:

UC Davis Center for Cooperatives
Canada Business Service Centre's Cooperatives Info Guide
What Are Cooperatives, USDA RBCDS/Cooperative Services publication