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Cooperatives (often referred to as “coops”) are an ancient concept where a group works together to meet common needs. This informal arrangement evolved over time into a formal business organization. Cooperatives have special status under tax laws in the United States and most other countries.

A cooperative is a business voluntarily owned and controlled by its member-patrons and operated for them on a nonprofit or cost basis. This implies that the cooperative exists to help its members with their primary business, rather than to be a profit-making entity itself. In fact, this view is simplistic in that successful cooperatives must be well-run businesses that resemble ordinary for-profit firms in many ways.

Cooperatives for farmers involve farm inputs (e.g., seed, fertilizer, and fuel), marketing cooperatives (e.g., those selling milk, grain, or other farm products), service cooperatives (e.g., those providing breeding services, dairy herd performance information, or electricity), and financial services (especially credit). Nonagricultural cooperatives include cooperatives that provide services for cooperatives (e.g., the Bank for Cooperatives), electric generation cooperatives, and business cooperatives (e.g., those providing inputs for hardware or grocery stores).

James W. Dunn
Jayson K. Harper
Lynn F. Kime
Pennsylvania State University