Chapter 15 - § 15.1 • INTRODUCTION AND OVERVIEW

• Jurisdiction: Colorado

§ 15.1 • INTRODUCTION AND OVERVIEW

This chapter examines business organizations known as "cooperatives" or "co-ops." Cooperatives may be created as corporate forms or unincorporated associations. In Colorado, the statutes governing cooperatives contemplate a corporate form of cooperative even if the cooperative does not issue stock to its members. This chapter will focus on corporate-styled cooperatives as well as Colorado's hybrid cooperative statute, which blends corporate and limited liability partnership elements into what is known as a limited cooperative association (LCA). The LCA has recently been gaining popularity not only with businesses seeking to operate in Colorado, but around the country. Because of the robust nature of Colorado's cooperative statutes, the state is becoming known around the country as the Delaware of cooperative law, with many companies from other states forming cooperatives here in Colorado.

The objective of most organizations, for-profit and nonprofit, is to generate profits, funding, or services for persons outside the organization, such as shareholders, investors, or users of the services. The purpose of a cooperative is to provide markets, goods, labor, or services to the members of the cooperative who are also its owners. Although cooperatives have many attributes similar to both for-profit and nonprofit entities, they have a richer philosophical basis and unique organizational and operational features that differentiate them from other types of corporate entities.

Due to the need and purpose to have multiple members (at least two), the cooperative is not a viable business organization option for a single person. Because of its philosophical and legal purpose to provide goods and services by, for, and of its member-owners, the cooperative entity is not a ready substitute for a classically identified "profit-oriented" enterprise. It is, however, a dynamic form of enterprise, designed to assist its members in pursuing their individual and common goals.

This chapter provides an introduction to the cooperative entity form, examines some of the fundamental principles that underlie cooperatives, provides an overview of matters to be considered in organizing a cooperative, and provides references to selected additional source materials to be examined in connection with the organization and operation of a cooperative.

While cooperatives are not confined to agriculture, much of the historical law and literature that has been developed with respect to cooperatives has arisen in the context of agricultural cooperatives. This chapter relies heavily on that law and literature, much of which is generally applicable to all types of cooperatives. In fact, recent developments and entrepreneurial applications of the cooperative business form have demonstrated the cooperative's suitability in numerous industries and for a wide range of applications.

Philosophical background and traditions vary among cooperatives by industry. Likewise...