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What is a cooperative? An open, democratic, and inclusive economic and social model

Cooperatives are a business model based on democracy, equality, and solidarity: all members have equal rights and can actively contribute to the life and growth of the organization.

A working and business environment oriented toward the common good

A cooperative is a one-of-a-kind economic and social organization. A cooperative is born from the voluntary union of people who share the common goal of meeting their own economic, social, and cultural needs and aspirations.

The distinctive feature of cooperatives lies in their democratic structure: within a cooperative, every person has equal rights and the same opportunity to actively participate in the dynamics and decisions of the enterprise.

The cooperative. Participation, integration, responsibility

In a cooperative, membership is voluntary and open to anyone able to contribute to achieving the social objectives and willing to accept the responsibilities of participation, without discrimination based on gender, race, social class, political orientation, or religion. This principle ensures inclusivity and accessibility, making cooperatives true spaces for participation and integration.

In the hands of the members. The cooperative is independent and democratic

Control of the cooperative is democratic and based on the principle of one person, one vote, regardless of the amount of capital held.

Every member has an equal say in business decisions, promoting a participatory management model where choices are the result of consensus and cooperation among members. The most important decisions are made collectively, often through general assemblies, where each member can express their opinion and contribute to defining the enterprise’s policies.

Cooperatives are autonomous and independent organizations, self-managed by their members. Even when they enter into agreements with other organizations or raise external capital, they maintain democratic control and autonomy, ensuring that decisions remain in the hands of the members.

An economic model centered on people and relationships

The cooperative's capital. All to the benefit of the members

From an economic standpoint, members contribute equally to the cooperative’s capital and democratically control its use. Part of the capital is generally the common property of the cooperative, and the profits generated are reinvested in the enterprise itself or distributed equitably among the members, as collectively decided. Members, therefore, do not simply receive a return on invested capital, but directly benefit from the economic results of the enterprise.

Cooperators. Aware individuals and protagonists within the economic and social fabric

Education and training are fundamental pillars for cooperatives, which invest in the growth and skills development of their members, elected representatives, and employees. This commitment to training allows everyone to effectively contribute to the progress of the cooperative and to participate knowledgeably in business decisions.

Deeply rooted. Cooperatives as agents of cohesion in the territory

Cooperatives are deeply rooted in their communities and are committed to sustainable and inclusive development. Through policies approved by members, they work to improve collective well-being, promoting projects that respond to local social and economic needs.

Cooperating among cooperatives. A mutual network

Cooperatives do not operate in isolation, but actively collaborate with other cooperatives at the local, national, and international levels. This cooperation among cooperatives strengthens the cooperative movement and amplifies its positive impact on the communities in which they operate.

How many cooperatives exist, and of what kind

Cooperatives differ based on the purpose their members pursue. In addition, different types of cooperatives can operate in many different economic sectors, both public and private.

Types of cooperatives

Consumer
cooperatives

Consumers join together to purchase goods and services at better prices

Agricultural cooperatives

They bring agricultural producers together to improve the production and marketing of products.

Worker cooperatives

Workers own and manage the enterprise

Credit cooperatives

They provide financial services to their members

Social cooperatives

They offer personal services such as healthcare and social assistance. Type A cooperatives offer personal services. Type B social cooperatives focus on the job placement of disadvantaged people. There are also mixed cooperatives that carry out both Type A and Type B activities.

Housing cooperatives

They handle the construction and management of housing for members.

Cooperative sectors, active protagonists of economic life

Cooperatives also operate in very specific sectors.
In manufacturing cooperatives, members work together to produce physical goods. In the digital and technology field, members and employees develop software, IT services, and technological innovations. In the innovation sector, they focus on new ideas and emerging technologies. There are also cooperatives that operate in the cultural field, promoting artistic, cultural, and educational activities; in the media sector, producing and distributing journalistic, television, and multimedia content; and in tourism, where they join forces to offer sustainable and authentic tourism experiences.

FAQ Cooperatives

A cooperative primarily serves to meet the common needs of its members through a participatory economic and organizational structure. Compared to other business forms, a cooperative is oriented toward mutual benefit rather than profit alone. Here are some of the most common purposes:

  1. Creating jobs: Production and labor cooperatives offer employment opportunities to members, allowing them to collectively manage the business and benefit from its economic results.
  2. Providing services to members: Consumer cooperatives, for example, are created to ensure members have access to goods and services at favorable prices or with controlled quality.
  3. Supporting social inclusion: Social cooperatives work to integrate disadvantaged people, offering assistance, education, and training services to improve their quality of life.
  4. Fostering local development: Agricultural or credit cooperatives, for example, support the local economy by promoting activities related to the production, processing, and distribution of local goods, or by offering favorable financial services to members.
  5. Managing collective assets or services: Some cooperatives are formed to manage common assets, such as housing or essential services, ensuring transparency and control by members.
  6. Responding to professional or cultural needs: Cooperatives can also be oriented toward cultural, educational, or professional interest purposes, offering members opportunities for growth and skills development.

The purpose of a cooperative is to improve the well-being of its members and the community, valorizing collective work and promoting sustainable economic and social development.

The main difference between a company and a cooperative lies in the orientation and structure of management. Here are the main points of distinction:

  1. Purpose:
    • Company: The main goal is profit, that is, maximizing earnings for shareholders or partners.
    • Cooperative: The purpose is mutualistic, meaning it aims to meet the needs of members (work, services, access to goods) and promote common well-being, rather than individual profit.
  2. Management and control:
    • Company: Decision-making power is proportional to the shares of capital held (more capital means more decision-making power).
    • Cooperative: Each member generally has one vote regardless of the capital contributed, favoring democratic management.
  3. Profit distribution:
    • Company: Profits are distributed among shareholders or partners in proportion to their share of capital.
    • Cooperative: Profits can be reinvested in the cooperative to improve services or distributed to a limited extent among members. Cooperatives enjoy tax benefits when they reinvest profits for mutualistic purposes.
  4. Share capital:
    • Company: A minimum capital is required (for example, at least 10,000 euros for an ordinary limited liability company).
    • Cooperative: No high minimum capital is required. Each member must pay a minimum share (25 euros by law), and the share capital is variable, changing as members join or leave.
  5. Tax benefits:
    • Company: Does not enjoy particular benefits, except in specific cases (innovative start-ups, SMEs, etc.).
    • Cooperative: Benefits from tax advantages, such as partial exemption on reinvested profits and tax reductions on certain levies.
  6. Social responsibility:
    • Company: Is not required to pursue social purposes, although some may choose to adopt social responsibility policies.
    • Cooperative: Is often tied to the local area and has a social and inclusive function, especially in the case of social cooperatives.

A company is a model oriented toward profit and the valorization of capital, while a cooperative is a participatory structure, designed to meet the needs of members and promote mutualistic and social values.

In a cooperative, there is no single owner as in other business forms; the owners are all the members. Each member shares equally in the ownership of the cooperative, regardless of the amount of capital they have contributed. This means that:

  1. Collective ownership: The cooperative belongs to its members, who share rights and responsibilities, as well as any profits.
  2. Democratic management: Each member generally has the right to one vote in assembly decisions, regardless of their share of capital, promoting participatory and democratic governance.
  3. Mutuality and benefits: The cooperative exists for the benefit of its members, who may be workers, users, producers, or members of the community.
  4. Variable participation: Being a shared ownership structure, the number of owners (i.e., members) can vary over time as new members join or leave.

Ownership of a cooperative is distributed among all its members, who work together for the common good and have equal decision-making weight, embodying the principle of self-management and participation.

A cooperative operates thanks to the active participation of its members, who share ownership, management, and the benefits of the business. Here is how a cooperative works:

  1. Formation: A cooperative is established through a public deed (before a notary) and articles of association, which set out the internal rules, objectives, and rights and duties of members.
  2. Membership: Anyone who shares the cooperative’s purposes can apply to become a member, provided they meet the requirements set out in the articles of association. Members contribute a share of capital to support the business.
  3. Democratic structure: The management of the cooperative is based on a democratic principle: each member has the right to one vote in the assembly, regardless of the share of capital contributed, ensuring fairness in decision-making.
  4. Members’ assembly: The assembly is the main governing body and is convened periodically to discuss and vote on strategic matters, such as approval of the financial statements, appointment of the administrative bodies, and decisions relevant to the business.
  5. Administrative bodies: The cooperative is managed by a Board of Directors or a President elected by the assembly, who handles operational, managerial activities and ensures compliance with mutualistic objectives.
  6. Profit distribution: Any profits are not distributed as in capital companies, but are partly reinvested to develop the cooperative. If distributed, they go to members in a limited amount proportional to their contribution to the business (for example, hours worked or amount of purchases).
  7. Variable share capital: Being an open structure, the number of members can vary. Members can join and leave, changing the composition of the share capital.
  8. Reinvestment and development: Part of the profits is used to improve services, the quality of work, or to expand activities, ensuring that the cooperative grows and increasingly responds to the needs of its members.

A cooperative is managed collectively and democratically to meet the needs of its members, maintaining a flexible structure oriented toward mutual support and common well-being.

The governing bodies of a cooperative are structured to ensure the democratic participation of members and transparent management. Here are the main ones:

  1. Members’ Assembly: This is the sovereign body of the cooperative, in which all members participate in fundamental decisions. The assembly approves the financial statements, decides on amendments to the articles of association, elects the Board of Directors, and deliberates on strategic matters. Each member has the right to one vote, regardless of their share of capital.
  2. Board of Directors: Elected by the assembly, the Board is the body that manages and represents the cooperative. Its members (called directors) are responsible for implementing the assembly’s decisions and for the day-to-day management of the business. The Board can appoint a president to coordinate the work and represent the cooperative externally.
  3. President: Appointed by the Board of Directors, the president is tasked with legally representing the cooperative, coordinating the Board, and ensuring that decisions are implemented correctly.
  4. Board of Auditors or Sole Auditor: In larger cooperatives (or when required by law), a Board of Auditors or a Sole Auditor is appointed to monitor administrative and accounting correctness. This body also oversees compliance with tax regulations and the mutualistic principle.
  5. Director or Operations Manager (optional): Some cooperatives appoint a director or operations manager to manage day-to-day activities, under the supervision of the Board of Directors.
  6. Members’ Committee (optional): In some cooperatives, especially larger ones, there may be a Members’ Committee, whose role is to represent members’ concerns and facilitate communication with the Board.

These bodies work together to ensure that the cooperative operates transparently, democratically, and with a focus on mutual benefit. The goal is to maintain participatory oversight and promote the well-being of all members.

The President of a cooperative is the legal representative and reference figure for the cooperative, elected by the Board of Directors. They have various responsibilities, including:

  1. Legal representation: The President officially represents the cooperative before third parties, such as institutions, partners, and clients, and holds legal signing authority to enter into contracts and agreements on behalf of the cooperative.
  2. Coordination of the Board of Directors: Chairs Board meetings, coordinates activities, and guides discussion for the implementation of strategic decisions. Ensures that directives approved by the Board and the Members’ Assembly are correctly implemented.
  3. Execution of Assembly decisions: Is responsible for following up on the decisions of the members’ assembly, ensuring that the cooperative’s mutualistic and statutory objectives are respected.
  4. Operational oversight: In some cooperatives, especially smaller ones, the President may also carry out operational tasks, working with the director or operations managers on the day-to-day running of the business.
  5. Guarantor of transparency: The President is a figure of assurance for members, ensuring that the cooperative operates transparently and that all decisions are made in accordance with democratic and mutualistic principles.

The President is the cooperative’s point of reference, tasked with representing it externally and ensuring that the business is consistent with the objectives set by the members, promoting participatory and responsible management.

In a cooperative, decisions are made collectively and democratically through various bodies, each with specific roles. Here is how the decision-making process works:

  1. Members’ Assembly: This is the sovereign body of the cooperative, made up of all members. The assembly makes the most important decisions, such as approving the financial statements, amending the articles of association, appointing directors, and setting strategic guidelines. Each member has the right to one vote, regardless of the share of capital invested, thus ensuring decision-making fairness.
  2. Board of Directors: Elected by the assembly, the Board is responsible for the ordinary management of the cooperative and for operational decisions. Board members, led by the President, implement the decisions made by the assembly and oversee day-to-day activities.
  3. President: Although not making unilateral decisions, the President plays a key role in coordinating the Board of Directors, representing the cooperative, and ensuring that decisions made by the assembly and the Board are put into practice.
  4. Possible Director or Operations Manager: In some cooperatives, there is a director who handles day-to-day management under the supervision of the Board, making operational decisions for ongoing operations.

Strategic, high-level decisions are made by the members’ assembly, while the Board and the President are responsible for operational management and the implementation of decisions, ensuring a democratic and participatory model.

The Members’ Assembly is the most important decision-making body of a cooperative and represents all members, who take part with equal rights. Here are the main tasks and functions of the assembly:

  1. Approval of financial statements: Each year, the assembly reviews and approves the cooperative’s financial statements, evaluating financial management and deciding on any distribution of profits (in line with mutualistic principles).
  2. Appointment of directors: The assembly elects the members of the Board of Directors and, in some cooperatives, also the Board of Auditors or the Sole Auditor. These bodies are then responsible for ordinary management and oversight of the cooperative.
  3. Amendments to the articles of association: The assembly has the power to approve amendments to the articles of association, adapting them to members’ needs or to regulatory changes.
  4. Strategic guidelines: The assembly defines the objectives and strategic guidelines of the cooperative, setting the direction to follow in order to meet members’ needs and ensure the cooperative’s sustainability.
  5. Decisions on extraordinary transactions: The assembly has authority to deliberate on extraordinary transactions such as mergers, demergers, transformations, and dissolution of the cooperative.
  6. Approval of internal regulations: In some cooperatives, the assembly approves internal regulations or rules governing membership life and the ways members participate.
  7. Review and approval of management reports: The Board of Directors presents an annual management report, which the assembly reviews to assess the effectiveness of activities and adherence to mutualistic purposes.

The Members’ Assembly is the decision-making heart of the cooperative, responsible for all major strategic and administrative decisions, ensuring that the cooperative remains true to its mutualistic objectives and democratic principles.

The Board of Directors of a cooperative is the body responsible for operational management and for implementing the decisions made by the Members’ Assembly. Here are the main functions of the Board:

  1. Operational management: The Board handles the day-to-day management of the cooperative, coordinating operational and administrative activities to ensure the organization’s continued functioning.
  2. Implementation of Assembly decisions: The Board puts into practice the guidelines and strategic decisions approved by the Members’ Assembly, ensuring that the cooperative’s activities are in line with its objectives and articles of association.
  3. Preparation of financial statements: The Board prepares the annual financial statements and management report, which it then submits for approval by the Assembly. It is also responsible for keeping accounts in order and ensuring financial transparency.
  4. Appointment of the President: In many cooperatives, the Board appoints the President from among its members, who will officially represent the cooperative and coordinate the Board’s activities.
  5. Decisions on investments and resources: The Board evaluates and approves any investments and the use of the cooperative’s economic resources, in line with the needs and projects set by the Assembly.
  6. Supervision of staff and worker-members: The Board oversees the work of worker-members and staff, ensuring that work is carried out according to the cooperative’s standards.
  7. Compliance oversight: The Board ensures that the cooperative complies with current regulations, including tax, labor, and mutualistic provisions.

The Board of Directors is the cooperative’s operational engine, turning the assembly’s decisions into concrete actions, ensuring effective management that remains true to mutualistic purposes.

The members of a cooperative play an active and participatory role in the life of the organization, contributing both as owners and as beneficiaries of mutualistic activities. Here are the main activities and responsibilities of members:

  1. Participation in the Assembly: Members take part in the Assembly, where they have voting rights to approve the financial statements, elect the Board of Directors, decide on amendments to the articles of association, and make strategic decisions. Each member has one vote, regardless of the share of capital paid in.
  2. Economic contribution: Members contribute a share of capital, which is used to finance the cooperative’s activities. The minimum share is set by law and by the cooperative’s articles of association.
  3. Operational collaboration: In some cooperatives (for example, worker cooperatives), members contribute directly through their own work. In others, such as consumer cooperatives, they participate as users of the services offered.
  4. Compliance with the articles of association and internal regulations: Members are required to comply with the cooperative’s articles of association and regulations, which set out the rights and duties of each member and govern participation in the business.
  5. Sharing mutualistic objectives: Members support the cooperative’s common objectives, such as improving the economic and social well-being of members, promoting employment, ensuring access to goods and services, or providing assistance and support.
  6. Participation in community life: Members take part in meetings, activities, and initiatives promoted by the cooperative, actively contributing to the community and to achieving common objectives.
  7. Possible distribution of profits: Profits, if provided for, may be distributed to members in a limited amount proportional to their participation (for example, work performed or goods and services purchased). However, many profits are reinvested to improve services and strengthen the cooperative.

Members of a cooperative are not simple investors but active participants and co-owners, who work together for the common good, taking part in democratic management and contributing to the cooperative’s success.

The members of a cooperative enjoy various advantages, which go beyond simple economic return and include social, tax, and participatory benefits. Here are the main ones:

  1. Access to goods and services on favorable terms: Members of a consumer cooperative, for example, can access products or services at reduced prices or with special benefits compared to the market.
  2. Participation in profits: Although limited by law, part of the profits may be distributed to members, especially based on their active participation (such as hours worked or amount of purchases).
  3. Tax benefits: Cooperatives benefit from reduced taxation on profits and other advantages, which allow them to reinvest more resources in the business, with indirect benefits for members.
  4. Employment benefits for worker-members: Worker-members of a production and labor cooperative have access to a fairer and more participatory work environment, and in many cases can benefit from favorable social security and contribution conditions.
  5. Democratic participation: Each member has the right to one vote, regardless of the share of capital contributed, and can influence the cooperative’s decisions and management. This ensures fair control and transparent management.
  6. Support and solidarity: Members of social cooperatives, for example, find important support for specific needs, such as social assistance or educational services, improving their well-being and that of their families.
  7. Skills development: In many cooperatives, members can access training and professional development opportunities, improving their skills and knowledge thanks to the cooperative’s support.
  8. Stability and resilience: Cooperatives tend to be more resilient during economic crises, thanks to risk sharing and member participation, thus offering greater security.

Members of a cooperative gain economic, social, and participatory advantages that improve both their individual condition and the community in which they operate.

Cooperatives benefit from favorable taxation, but are still subject to various taxes, albeit with some specific reductions. Here is an overview of the main taxes paid by cooperatives:

  1. Corporate income tax (IRES): Cooperatives pay IRES, but with some benefits. Predominantly mutual cooperatives (those that offer services or work mainly to their members) may have part of their profits exempted from this tax, provided the profits are reinvested for mutualistic purposes and not distributed to members.
  2. IRAP (Regional Tax on Productive Activities): Cooperatives are subject to IRAP, although in some regions there may be benefits for social cooperatives or those operating in strategic sectors.
  3. VAT: Cooperatives must apply VAT on sales and services offered, like other businesses. However, some cooperatives, such as agricultural and social ones, may benefit from reduced VAT rates or sector-specific benefits.
  4. Registration tax: The cooperative pays registration tax for its articles of incorporation and other notarial or contractual transactions, but often benefits from reductions on registration tax and mortgage and cadastral taxes.
  5. Biennial audit contribution: Cooperatives must bear the costs of a biennial audit, which vary depending on the size of the cooperative and its sector classification.
  6. Municipal and regional taxes: Like all other businesses, cooperatives also pay local taxes, such as TARI (waste tax) and IMU (property tax, if they own real estate), albeit with some benefits for social cooperatives or those engaged in activities of collective interest.

Tax benefits are greater for social cooperatives and for predominantly mutual cooperatives, which play a stronger role in supporting the community. In summary, cooperatives pay the main business taxes, but with significant benefits designed to encourage their social and mutualistic function.

A cooperative’s profits are managed differently from those of a traditional company, in line with mutualistic principles and the purpose of collective benefit. Here is how profit management works:

  1. Reinvestment: A significant portion of profits is reinvested in the cooperative itself, to improve services, increase share capital, finance new projects, and ensure long-term growth. This allows the cooperative to become more solid and sustainable, for the benefit of all members.
  2. Legal reserve fund: A share of profits (generally at least 30%) must by law be allocated to the legal reserve fund, which represents an asset reserve to protect the cooperative’s financial stability.
  3. Mutual funds for cooperative promotion: A share of profits (at least 3%) is allocated to mutual funds, which are used to promote cooperation at the national level or to support new cooperatives. These funds are managed by dedicated bodies, such as cooperative representative associations.
  4. Limited distribution to members: In some cooperatives, a limited portion of profits may be distributed to members, but always in a contained amount proportional to their participation (for example, work performed or goods and services purchased). Direct distribution to members is in any case subject to restrictions to preserve the mutualistic nature.
  5. Benefits or discounts for members: Instead of distributing profits in cash, some cooperatives may decide to offer direct advantages, such as discounts on services, better terms, or preferential access to goods and benefits.
  6. Specific allocations for social cooperatives: In social cooperatives, profits are often earmarked for social or assistance projects, with reinvestment planned in activities that support social and inclusion purposes.

Profit management in a cooperative is geared toward sustainability, growth, and common benefit, maintaining a balance between reinvestment, reserves, and limited advantages for members, always with the goal of strengthening the cooperative and supporting the community.

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