A cooperative (also known as a co-op) is a unique form of ownership and organization that serves its members through collective ownership and control. There are mainly two broad types of cooperatives: real property cooperatives and production or marketing cooperatives.
Real Property Cooperatives
Definition
A cooperative in real property is a type of corporate ownership wherein stockholders of the corporation are entitled to use a specific household unit or other units of space. In these structures, the corporation owns the property, but residents (tenant stockholders) own shares in the corporation, granting them the right to lease a particular unit.
Income Tax Considerations
Special income tax laws provide benefits to tenant stockholders:
- Pro Rata Share of Interest and Property Taxes: Tenant stockholders can deduct their share of interest and property taxes paid by the corporation. This is different from owning a condominium, where owners directly own their units.
1\text{Pro rata share} = \frac{\text{Tenant Stockholder's Shares}}{\text{Total Shares}} \times \text{Total Interest and Property Taxes Paid}
Examples
- Residential Co-ops: Some urban apartment buildings operate as cooperatives.
- Housing Co-ops: These can be found in collegiate environments where students collectively manage housing.
Production or Marketing Cooperatives
Definition
A production or marketing cooperative is an organization set up for the collective production or marketing of goods, owned by members who share the benefits. These cooperatives can significantly boost bargaining power, reduce costs, and improve market access for their members.
Agricultural Cooperatives
Agricultural cooperatives are common and have substantial economic and social impacts. They allow farmers to pool resources, share machinery, and collectively sell their produce, often resulting in better market prices and reduced individual risk.
Historical Context
Agricultural cooperatives have deep historical roots, particularly in rural communities where collaboration was essential for survival and success.
Applicability
Advantages of Cooperatives
- Economic Participation: Members can pool resources and share the benefits.
- Democratic Control: One member, one vote system.
- Community Impact: Often, cooperatives are more deeply integrated and beneficial to local communities.
Comparisons
- Cooperative vs. Condominium: In a cooperative, the corporation owns the property, and you own shares in the corporation. In a condominium, you own your unit outright.
- Cooperative vs. Traditional Corporation: In traditional corporations, shareholders may not directly benefit from the usage of properties or produced goods, whereas in a cooperative, members directly share the benefits.
Related Terms
- Mutual Company: Similar in that policyholders share in the profits.
- Credit Union: A cooperative banking institution owned and controlled by its members.
FAQs
What is the major difference between a co-op and a condominium?
What tax benefits are available to tenant stockholders in a cooperative?
Are cooperatives only found in the residential real estate sector?
References
- Birchall, J. (2004). Co-operatives and the Millennium Development Goals.
- Zeuli, K., & Cropp, R. (2004). Cooperatives: Principles and Practices in the 21st Century.
- USDA Rural Development. (2015). Understanding Cooperatives: Cooperative Information Report 45.
Summary
A cooperative organization, whether for real property or production and marketing, offers unique benefits of shared ownership and collective control. They provide their members with economic advantages, democratic participation, and community integration, setting them apart from other forms of corporate and ownership structures.
