Why do Land O’ Lakes, Ocean Spray, and Sunkist retain the cooperative structure? Perhaps the primary reason is the tax advantage. Much like the LLC form of organization, cooperatives are not taxed on surplus earnings, which are distributed to members as patronage dividends. Thus, members of a cooperative are taxed only once on their earnings — at the individual level — and not on the cooperative level. By contrast, earnings of corporations are taxed twice — at the corporate level and as dividends to individuals.
Another reason some firms choose the cooperative structure is economies of scale. They leverage their size to obtain discounts on supplies, material, and services. Finally, the democratic form in which cooperatives operate is appealing. Regardless of their size, all members have one vote, preventing any member-owner from being dominant in decision making.
Apparently, the cooperative structure has worked well for Land O’ Lakes, Ocean Spray, and Sunkist. After all, they have been in business a total of 325 years!
Read the rest at The South Alabamian
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