Difference Between Corporation and Cooperative
The difference between corporation and cooperative is that a corporation is a legal entity that stands separate from its owners. 3 min read updated on September 19, 2022
The difference between corporation and cooperative is that a corporation is a legal entity that stands separate from its owners. A cooperative, however, is an association of individuals voluntarily cooperating for the promotion of mutual, social, cultural, and economic benefits.
About Corporations
As a separate entity owned by shareholders, a corporation has legal rights and liabilities. The entity may work for profit or choose to work not for profit. In general, a corporation is created with a goal of making a profit. The profits earned are initially invested back into the corporation. The remainder is distributed among the corporation's stockholders in the form of dividends.
A corporation is a separate entity apart from its owners. So, if there's a situation where the company is held accountable, the blame falls only on the corporation.
Profits
Corporations make a profit by selling financial instruments, such as stocks and bonds.
Types of Corporations
A corporation may be a subchapter S corporation or a professional corporation.
Structure
Members must act in accordance with the charter put in place for the corporation. It's a more structured set up with less flexibility, and transfer of ownership is easy.
Liability
Stockholders aren't held responsible if the corporation goes into default.
Dissolution
Dissolving a corporation requires stockholder and/or government approval.
Formation
A corporation is formed and registered according to the rules of the Companies Act.
Number of Members
For a company/corporation, which is considered a public entity, the minimum number of members is seven. There's no maximum. A private corporation requires a minimum of two and a maximum of 50.
Voting Rights
A corporation, or joint stock company, works under the principle that one share equals one vote. With a cooperative, members have equal rights. This means each person has one vote.
Member Locality
With a corporation, stockholders may reside in many areas.
Share Transfers
Shares in a corporation may be transferred without any problems. However, the capital can't be withdrawn.
Closure of Share List
Since no restrictions apply to the maximum membership number for public corporations, the share list remains open and isn't closed at any time.
About Cooperatives
A cooperative operates for the benefit of those working together. Every customer is considered a member, and every member is considered to be a part owner. Some of the benefits of a cooperative include:
- Those involved with cooperatives share principles internationally. Each cooperative acts together for the betterment of the world through cooperation.
- The goal is meeting the common needs and aspirations of the cooperative's members through shared ownership and democratic decision making.
- Members share equally in the responsibilities, profits, and duties associated with the cooperative.
- Decisions are decided by each member who casts their vote. A popular vote is used to elect members, including the treasurer, secretary, and chairman.
- Cooperatives are analogous to working for the beneficial good.
- Corporations are analogous to capitalism for profit and gain.
Structure
A cooperative is based on values that include democracy and equality, equity and solidarity, self-help, self-responsibility, and these seven principles:
- Open and voluntary membership.
- Democratic member control.
- Economic participation by its members. Independence and autonomy.
- Training, education, and information.
- Cooperation among the members of the cooperative.
- Genuine concern for the community.
Profits
Cooperatives earn money through member investments.
Types of Cooperatives
Retailer; worker; volunteer; social; consumer; business and employment; new generation; housing; utility; agricultural; credit unions; and federal or secondary cooperatives.
Liability
This is based on the structure of the cooperative in accordance with regional cooperative law.
Dissolution
A cooperative is dissolved by member approval via equal voting.
Formation
A cooperative is formed under the State Cooperatives Act or the Cooperative Societies Act.
Voting Rights
With a cooperative, members have equal rights. This means each person has one vote.
Member Locality
In a cooperative, members of the society are located in one place or town. With a corporation, stockholders may reside in many areas.
Share Transfers
In a cooperative, shares aren't transferable. However, members can withdraw their capital with proper notice given to the society.
Closure of Share List
A cooperative's share list is closed once capital is issued, which means membership is restricted.
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