A co-operative structure is a legally incorporated entity designed to serve the interests of its members. Co-operatives carry on businesses in all sectors and they may be profit sharing enterprises or non-profit organisations. They serve their members by providing goods and services that may be unavailable or too costly to access as individuals. They share costs and carry on their enterprise under principles of:

  • non-discrimination
  • democracy
  • independence
  • education and care for communities.

Generally, all members are expected to use or contribute to their co-operative and have an equal say in the running of the organisation. Co-operatives are subject to state and territory legislation the Co-operatives National Law.

Types of co-operatives

There are two types of co-operatives:

  • Distributing co-operatives: can distribute any annual profits to members. A distributing co-operative must have share capital and members must own the minimum number of shares specified in the co-op rules
  • Non-distributing co-operatives: can’t share profits with members. All profits must further the co-operative’s purpose. It may or may not issue any shares to members. If the co-operative does not have share capital it usually charges members a regular subscription fee. For taxation purposes, non-distributing co-operatives meet the ‘not for profit’ definition.

Key elements of co-operative

There are key elements you should know if you’re looking at starting your business as a co-operative:

  • a minimum of 5 members is required
  • they are governed by a board of directors that is elected by the members
  • all members must maintain an active relationship with their co-operative by using or contributing to its main activities
  • all active members have an equal vote at general meetings regardless of their shareholding
  • co-operatives are limited liability entities, meaning that members have no direct responsibility for debts of the co-operative
  • directors of the co-operative owe legal duties to the co-operative and under the law that may lead to prosecution and compensation if they are negligent, reckless or fraudulent in carrying out their responsibilities
  • co-operatives are formed to provide services to their members rather than to maximise a financial return on investment
  • members are rewarded by having access to less costly or better goods and services, these rewards may be in the form of rebates, or for distributing co-operatives, there may be limited dividends on their shares
  • anyone who can comply with a co-operative’s rules can apply to be a member, with the directors making decisions about the suitability of applicants
  • members, other than directors, can be under 18, though these members cannot stand for office and do not have the right to vote

Types of members

All co-operative members must be active, the types of members include:

  • Customer-owned co-operative: members jointly purchase goods and services, improving value for money and access to expert advice.
  • Worker-owned co-operative: members of a worker co-operative are the employees of the co-operative and the co-operative provides work for its members.
  • Producer-owned co-operative: smaller businesses can group together in producer-owned co-operatives to share supply chain costs and reach markets.
  • Multi-stakeholder co-operative: formally allow for governance by representatives of two or more stakeholder groups within the same organisation.

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