A cooperative is a business model for individuals, organizations and communities. To understand how a co-op is structured, first you need to understand its foundation. Co-ops are built upon ethical values to serve identified needs such as affordable housing, responsible loans or sustainable food. Co-op organizers say cooperatives are values-based businesses because they believe in the principled values of honesty, openness, social responsibility and caring for others.

Principles of Cooperation

How a co-op conducts business is based on seven organizational principles. The International Cooperative Alliance established principles that define the co-op business model: open and voluntary membership (anyone can join); democratic member control (members participate by voting); member economic participation (members invest in the co-op); autonomy and independence (members retain control, not outside sources); education, training and information (members learn and support learning); cooperation among cooperatives (members strengthen other members); and concern for community (members meet the needs of their community).

Meeting Needs

The heart of a co-op beats with its service to community. Cooperatives are organized of people for people. When electricity was needed in rural areas in the 1930s, electric co-ops formed in those communities and were made up of the farmers, households and business owners that would benefit from electricity. In the 1970s, people in towns across the nation wanted access to healthier wholesome food with less packaging. Those organizers started food cooperatives that are now sizeable retail operations. As of publication, there are 12 community and member-owned cooperatives in the Twin Cities of Minnesota that provide sustainable food.

Types of Co-ops

Whatever the need, cooperatives are usually structured according to their type. The two main types of cooperatives are consumption (consumer-owned) and production (producer-owned). How each type is organized depends upon the co-op’s service to individuals or organizations. Consumer co-ops are often looking to share services or benefits such as a community that organizes a food co-op to serve as a retail business. Producer co-ops are often organized to market a collective of workers or businesses. For instance, farmers who work in cranberry bogs might form a cooperative to better leverage their marketing power through pricing, distribution and promotion.

Member Involvement

An example of the Principles of Cooperation in practice is a food co-op that is a retail business open to the public -- anyone can shop there and everyone is welcome to join. Membership requires paying a fee that is then used to provide equity for the co-op. The more the member shops at that co-op, the more the member earns back from the overall business profit, or patronage refund. If the member is in good standing, she can run for the board of directors. The membership then votes for these directors.

Board Structure

Staying with our example of a food retail co-op, the board of directors becomes an important part of the organizational structure. The elected members oversee the general manager of the co-op store, plan for the future and guide the management of resources. The general manager is responsible for daily operations and meeting business goals of the co-op. This also creates a communications feedback loop: Members express needs to the board directors and they communicate it to the general manager, and his team executes a response.

Organizing a Co-op

Any group of people considering the benefits of organizing a co-op in their community can find support for their emerging development through organizations such as National Cooperative Business Association, International Cooperative Alliance or University of Wisconsin Center for Cooperatives. Organizational structure begins first with a group of people interested in meeting a community need.