The legal form of a co-operative can be a partnership or a limited company.
Co-operatives were once very popular though less so in the
UK today. They typically have a business economic and
social purpose. From the mid-19th century, retail
co-operatives offered better retailing arrangements,
quality goods and cheaper prices with participation
in profit distribution for working class families.
Co-operative profits are not distributed to shareholders but member-customers. Instead at the year end, profits ordinarily paid out as dividends are distributed to customer members of the co-operative - in proportion to how much they have spent in "the shop" (contribution to the profit). A member has one share (one vote). Today retail co-operatives still exist and "stamps" are issued according to the value of a memberçs purchases- these are then typically traded for equivalent value of goods. So the co-operative theoretically offer goods at cheaper prices. Customer-members receive dividends and participate in ownership of a "democratic" business which theoretically should be more aware of customer needs and expectations. Once registered, the co-operative can enjoy limited liability.
But from a viewpoint of competitive, market-oriented business activity there are disadvantages. If customers control the organisation and take a substantial share of profits there may be less money for expansion and re-investment. Relationships between members and employees may be in conflict and management decision making in a "democratic culture" may be sluggish. The co-operative business may remain too small to secure economies of scale and find itself limited in its ability to raise capital to secure business growth.
