October is National Cooperative Month. It's a good time to myth-bust on what a co-op is and is not.

Cooperatives have a rich history rooted in democracy.
(University of Wisconsin photo via USDA)

Cooperatives are corporations; however, they are different than investor-owned firms in that the members that use the cooperative are the owners and benefit from their operations. Cooperatives allow individuals to operate together as a business and tackle economic issues they cannot solve individually. Here are some common myths about cooperatives from the Department of Agriculture.

Myth: Cooperatives are only in agriculture. False. Cooperatives exist in many industries. For example, home health, housing, grocery, rural electric distribution, finance, restaurant supply, outdoor gear, floral delivery, and news reporting.

Myth: Cooperative groceries are hippy throwbacks, only members can shop there. While many may have started in the '60s and '70s with a focus on organic and natural foods, today, cooperative groceries look much like any other grocery. The main difference is they operate for the benefit of the member-owners instead of outside investors. Thus keeping investment in the community and developing local wealth. . . . Many cooperatives are open to non-member business. Non-members can use the services however will not share in the surplus at the end of the year.

Myth: Co-ops are charities. False. Cooperatives, like any business, can choose a variety of legal structures depending on where the members choose to incorporate. The difference between non-profit (charitable) and the co-op is how revenue is generated and what is done with the surplus (profit).

The Ocean Spray co-op includes over 700 grower families
across North and South America. (Ocean Spray photo)

Myth: It's impossible for a co-op to be innovative. Cooperatives have been formed specifically to develop an innovative approach to market failures. One such example would be Ocean Spray. Read their history here.

Myth: Co-ops can't scale. There is a wide range of sizes for cooperatives. While many start out small, if the need is being met and the business is managed well the co-op will grow. Successful cooperatives are active members of their communities throughout the U.S. and the world. Some recognizable names are: Ace Hardware Corp., Blue Diamond Growers, Sunkist Growers, Independent Pharmacy Coop., and HealthPartners Inc.

For additional information on cooperatives visit:
CIR 7 How to Start a Cooperative; CIR 7 Cómo Empezar Una Cooperativa
SR 58 Feasibility Study Guide