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Business Forms: American Enterprise System & Cooperatives

This unit explores various business forms in the American Enterprise System and the role of cooperatives in rural development. Learn about proprietorships, partnerships, corporations, hybrid LLCs, and the principles of our business system. Understand the characteristics, benefits, and ownership structures of each business form.

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Business Forms: American Enterprise System & Cooperatives

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  1. UNDERSTANDING COOPERATIVES UNIT 1 - The American Business Enterprise System Business Form Characteristics Slides for Unit 1 Rural Development – Cooperative Programs U.S. Department of Agriculture

  2. Our Business System Principles: • Freedom of choice • Private property rights • Profit motives of owners • Owner control S 1.1

  3. Individually Owned (Proprietorship) • A business enterprise where the individual owns, operates, manages, and receives the earnings of the business (The oldest and most common method of doing business.) S 1.2

  4. Partnership • A business enterprise owned and controlled by two or more people who have agreed to operate on a partnership basis. (Family partnerships are common in farming.) S 1.3

  5. Corporation: Investor-Oriented • A (State-chartered) business that has the right to buy and sell goods and services. (Operated as a profit-making enterprise for its investors.) S 1.4

  6. Corporation: Cooperative • A user-owned and user controlled (State-chartered) business in which benefits are received in proportion to use. (Commonly used in agriculture to buy, sell, and service individual farm businesses.) S 1.5

  7. Hybrid: Limited Liability Company • A business structure that combines characteristics of both a partnership and a corporation. It combines the single-tax treatment of a partnership with the limited personal liability of a corporation. As in a cooperative, LLC owners are called members. (Becoming increasingly common in agricultural business today.) S 1.6

  8. Comparison of Methods of Doing Business Corporate Form Hybrid Limited Liability Features Individual-Owned Partnership Investor-Oriented Cooperative Who uses the Nonowner Generally Generally Generally the Generally services? customers nonowner nonowner members nonowner customers customers customers ---------------------------------------------------------------------------------------------------------------------------------- Who owns the The individual The partners The stockholders The members The members business? ---------------------------------------------------------------------------------------------------------------------------------- Who votes? Not applicable The partners Common stockholders The members The member ---------------------------------------------------------------------------------------------------------------------------------- How is voting Not applicable Usually by By shares of One-member, Usually by conducted? Partners’ share common stock one-vote or members’ in capital proportional share in capital ----------------------------------------------------------------------------------------------------------------------------------- S 1.7

  9. Free Enterprise Systems Two major differences: ownership and profit incentive Ownership Profit incentive Individually owned The individual Profit for the individual owner ----------------------------------------------------------------------------------------------------------------- Partnerships Two or more individuals Profit for the two or more partners ----------------------------------------------------------------------------------------------------------------- Investor-oriented The stockholders Profit (dividends) for stockholders ------------------------------------------------------------------------------------------------------------------ Cooperative corporations The members Profit for members (higher income) ------------------------------------------------------------------------------------------------------------------ Limited-liability corporation The member investors Profit for member investors ------------------------------------------------------------------------------------------------------------------ Public business The public Least cost to taxpayers S 1.8

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