4 BULLETIN 547, TJ. S. DEPARTMENT OF AGRICULTURE. 
condition of affairs is the fact that only within the last few years 
have the laws of the various States made specific provision for the 
organization of truly cooperative associations, and even at the 
present time a large number of States do not have special laws for 
this purpose. The present cooperative laws of some of the States are 
so general in nature that organizations formed in accordance with 
them do not necessarily embody the underlying principles of coop- 
eration. Therefore a large number of farmers' organizations have 
been formed under general corporation laws. Many organizations 
that have been formed under general corporation laws might be re- 
organized under cooperative laws, where such laws have been passed, 
with benefit to the members. 
Among the general public there is not a clear conception of the 
differences between the cooperative and noncooperative forms of 
organization, with the result that noncooperative organizations 
frequently are called cooperative. Many of these associations have 
been started by a few persons and are operated for their profit. 
In support of the practice of paying large stock dividends it usually 
is stated that, since the stockholders are the ones who are taking the 
risk and will have to stand any losses that may be encountered, 
they are entitled to all the profits. Organizations which set aside 
an adequate reserve to cover any reverses that are likely to be en- 
countered, protect its stockholders. Such organizations are in a 
position to distribute the profits on a patronage basis after paying 
the stockholders a stock dividend that represents a fair rate of inter- 
est on the money invested. In a noncooperative capital-stock com- 
pany there is always danger of the ownership of capital stock be- 
coming centered in one or a few individuals. The men in control 
may not be farmers, or if they are, they may retire from business 
or move to some other locality, with the result that the men who 
patronize the organization have no hand in its management. 
The incentive to buy up a large amount of the capital stock is 
removed by hunting the stock dividend to a fair rate of interest 
on capital invested, while the limitation of the number of shares a 
member may own effectively provides against the possibility of the 
stock coming into the hands of a few. Some organizations also 
place restrictions on the transfer of stock in order to keep the shares 
in the possession of patrons of the association. 
The separation of farmers' organizations in the United States into 
cooperative and noncooperative groups is by no means a simple 
task. Some authorities on cooperation insist that an organization 
must meet all the requirements laid down for cooperative organiza- 
tions before it can be classed as such; on the other hand, there are 
persons who class all farmers' organizations as cooperative. If the 
former method is followed, a large number of the farmers' organiza- 
