A cooperative association is a business entity formed by individuals for their mutual benefit, and is usually organized under general state business laws or specific state statutes governing cooperative associations. The rights and duties of the members of a cooperative association are governed by state statutes and by the association’s charter or articles of incorporation.
Each shareholder in a cooperative association has equal ownership and an equal share in the control of the association, regardless of the number of shares of stock held by the shareholder. Profit earned by the association is divided among the shareholders based on the amount of their purchases during the period the profit was earned.
In Texas, cooperative associations are typically formed under the Texas Cooperative Association Act, which provides the legal framework for their creation, governance, and operation. These associations are designed to serve the mutual benefit of their members and are often used in agricultural, electric, and housing sectors, among others. The rights and duties of members are dictated by state statutes, as well as the cooperative's own charter or articles of incorporation. In a cooperative association in Texas, each member generally has an equal vote, regardless of the number of shares they hold, emphasizing democratic control. Profits, referred to as 'patronage dividends,' are distributed to members based on their use or patronage of the cooperative, rather than on the number of shares owned. This means that the more a member uses the cooperative's services or products, the greater their share of the profits will be. It's important to note that specific rules can vary depending on the type of cooperative and the sector in which it operates.
