Some Agricultural Cooperative 
Principles 
In carrying out the one objective—to help 
farm families—the following fundamental prin- 
ciples of non-profit cooperatives are recognized 
and adhered to: 
|. Human rights are superior to property rights. 
The member has one and only one vote, re- 
gardless of the number of shares of stock held 
in the organization. 
2. Use of the organization is on a voluntary basis. 
3. Returns on invested capital are limited. 
4. The operation is conducted on a non-profit 
basis. Net savings or margins are returned to 
users in proportion to their patronage. 
5. Members and non-members are treated alike. 
6. Full and complete information is made avail- 
able to members and to the public. 
Agricultural cooperatives are usually incorpo- 
rated under different laws than those that govern 
other businesses. Southern States Cooperative is 
incorporated under the Cooperative Marketing Act 
of the State of Virginia. The law contains pro- 
visions for the protection of members and the gen- 
eral public and the required adherence to coopera- 
tive principles and non-profit operations. The 
basic requirements of the Federal and state coop- 
erative statutes are set forth below: 
1. A true farmer-cooperative must operate on a 
non-profit basis. No profits can be realized 
by the cooperative corporation as such. Any 
net margins over operating expenses, after 
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reasonable and necessary reserves, belong to 
and must be returned to those who use the 
institution and in proportion to the use made 
of the organization by each person. These 
returns are called patronage refunds. 
2. A true farmer-cooperative may have as mem- 
bers only producers of agricultural products. 
3. A true farmer-cooperative must do at least 
50%, of its total business with members. 
4. A true farmer-cooperative must conduct at 
least 85% of its total business with agricul- 
tural producers—actual farmers. 
5. A true farmer-cooperative can pay only 
limited interest on capital. In the State of 
Virginia dividends on capital are limited by 
law to 6%, by Federal law to 8%. This means 
that Southern States cannot pay any stock- 
holder more than 6% per annum for the use 
of his money, while in proprietary (private) 
business a person may receive unlimited 
dividends on his stock investment. 
6. In a true farmer-cooperative the member has 
but one vote. Stock does not vote. In pro- 
prietary (private) business a person has as 
many votes as the number of shares he owns. 
This cooperative provision for ''one-man, one- 
vote'' control makes for real democracy. 
Organizations that can conform to these basic 
principles, along with other legal requirements, are 
true farmer-cooperatives and are exempt from 
Federal income taxes for the simple reason that the 
cooperative can have no income for its own account. 
SOUTHERN STATES COOPERATIVE 
