6 BULLETIN" 541, TJ. S. DEPARTMENT OF AGRICULTURE. 
DIFFERENCES BETWEEN NONSTOCK AND STOCK FORMS OF 
ORGANIZATION. 
The stock form of organization is the most common, but as this 
type does not meet the requirements of section 6 of the Clayton Act, 
added importance is given to the nonstock form, as far as agricul- 
tural associations are concerned. A fundamental difference be- 
tween the two forms of organization is that, in one, stock must be 
purchased before a person is entitled to membership, while in the 
other it is customary to require a membership fee only. 
In the stock form, there is no doubt about the financial interest 
of each member in the organization, while in nonstock organiza- 
tions such interest can not always be so easily ascertained. When 
the necessary capital is secured exclusively by means of a member- 
ship fee, there is little difficulty in this particular; but if the money 
be obtained by levying assessments on the members in proportion 
to the business done for them by the association, it is impossible to 
know what each member's interest is unless complete records be 
kept. 
The ordinary stock corporation distributes its profits in the shape 
of dividends on its shares of capital stock, while, in a truly coopera- 
tive organization having capital stock, any surplus to be divided is 
distributed, by first paying upon the capital stock a sum which 
represents a fair rate of interest on the money invested, and then 
dividing the balance in the form of what has been popularly called 
" patronage dividends," the latter distribution being based upon the 
amount of business transacted for the members by the organization. 
As a concrete illustration of these two methods, the following may 
be used: If a stock corporation with a capital of $5,000, divided into 
50 shares of $100 each, does a business of $100,000 and accumulates a 
surplus of $1,000, above expenses and what is necessary for maintenance 
and reserve funds, a dividend of 20 per cent may be paid on each 
share; that is, every stockholder may receive $20 for each share he 
owns. If this organization operates on the cooperative plan, it will 
pay a dividend which is equivalent to a fair rate of interest, say 6 
per cent, on the capital invested in its stock, amounting to $6 per 
share, or a total of $300 in the form of interest, and then distribute 
the remaining $700 in the form of so-called " patronage dividends," 
amounting to 70 cents on every $100 of patronage. Nonstock 
organizations formed in accordance with the requirements of section 
6 should distribute savings on a ratable basis of patronage. 
Another common difference between the ordinary stock form and 
the nonstock form of organization relates to the voting power of 
the members. In the former it is customary to allow each member 
to vote according to the number of his shares, while in the latter all 
members have the same voting power. However, it should be 
