2 BULLETIN 1106, TJ. S. DEPARTMENT OF AGRICULTURE 
INTRODUCTION 
Before taking up the strictly legal phases of cooperative organiza- 
tions, something will be said concerning the character and character- 
istics of farmers' cooperative associations. 
Agricultural cooperation is a method of doing business. An agri- 
cultural cooperative association is a business organization owned 
and controlled by member agricultural producers, usually incorpo- 
rated, which operates for the mutual benefit of its members or stock- 
holders as producers or patrons on a cost basis after allowing for 
the expenses of operation and maintenance and any other authorized 
deduction for expansion and necessary reserves. This definition is 
intended only as an approximation. It should not be assumed that it 
is unnecessary for a cooperative association to have money, although 
the amount of money necessary for a given association depends upon 
the character of its business and the scope of its plans. Working 
capital and adequate financial reserves are as essential for a coopera- 
tive association as they are for a commercial concern. In respect 
to cooperative associations, producers may be members, creditors, 
debtors, and patrons. 
Cooperative associations in this country, formed for the marketing 
of farm products or for the purchase of farm supplies, or both, con- 
stitute one of the most important groups of farmers' organizations. 2 
The purpose of this group of farmers' business organizations is to 
engage in business activities incident to the marketing of the products 
of its members or the acquisition of farm supplies for them. The 
foundation and framework of a farmers' cooperative association and 
all of its methods and plans are for the purpose of aiding those pro- 
ducers who have united or who may unite in the enterprise to conduct 
it along sound, successful business lines. That agricultural producers 
have the right to market their own products through their own agen- 
cies is obvious. Forms of organization vary, but there are a few well- 
recognized principles which distinguish the cooperative from the 
commercial organization. 
The cooperative character of an association does, not depend upon 
whether it is formed with or without capital stock. Either type of 
association may be thoroughly cooperative if properly organized and 
operated. 
Substantial equality among the producers who are interested in a 
cooperative association, with respect to its affairs, is fundamental. 
Tho one-man, one-vote principle is generally accepted by cooperatives, 
but is not indispensable. Sometimes equality among members in the 
capital-stock form of cooperative association is furthered through 
limiting the number of shares which a producer may own. This is in 
contrast to the situation in commercial corporations in which, from 
a legal standpoint, a shareholder may own any available number of 
shares. Frequently, even in the case of capital-stock cooperatives, the 
shareholders are restricted to one vote each, regardless of the num- 
ber of shares of stock owned. The dividend rate on the stock or 
membership capital of cooperative associations is restricted to a fair 
rate of interest. This again is in contrast with the situation in com- 
2 See the following publication: Elsworth, R. H. agricultural cooperative asso- 
ciations, marketing and purchasing, 1925. D. S. Dept. Agr. Tech. Bui. 40, 98 p., iUus. 
1928. 
