Consumer Cooperative - Finance and Approach To Capital Accumulation

Finance and Approach To Capital Accumulation

The customers or consumers of the goods and/or services the cooperative provides are often also the individuals who have provided the capital required to launch or purchase that enterprise.

The major difference between consumers' cooperatives and other forms of business is that the purpose of a consumers' cooperative association is to provide quality goods and services at the lowest cost to the consumer/owners rather than to sell goods and services at the highest price above cost that the consumer is willing to pay. In practice consumers' cooperatives price goods and services at competitive market rates.

Where a for-profit enterprise will treat the difference between cost (including labor etc.) and selling price as financial gain for investors, the consumer owned enterprise may retain this to accumulate capital in common ownership, distribute it to meet the consumer's social objectives, or refund this sum to the consumer/owner as an over-payment. (Accumulated capital may be held as reserves, or invested in growth as working capital or the purchase of capital assets such as plant and buildings.)

While some claim that surplus payment returns to consumer/owner patrons should be taxed the same as dividends paid to corporate stock holders, others argue that consumer cooperatives do not return a profit by traditional definition, and similar tax standards do not apply.