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1.4: Cooperatives are an Example of a Closely-Held Firm

  • Page ID
    4248
  • Thus far, the discussion has focused on investor-benefit firms whose stock is traded on exchanges. However, there are other forms of corporations whose stock is not publicly-traded. Family-owned firms account for a large number of corporations in the food economy. There are non-family owned

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    firms that are also privately held but whose shareholders are venture capital funds or similar entities whose members include management. In addition, there are many families who control the governance of a company through different classes of common stock with differing control rights.

    In a broad sense, firms can be thought of in three ways. A non-profit firm is organized to benefit the public. Its governance is volunteer-based with no ownership by anyone since it rarely has any assets. It is not taxed on its income, since non-profits are not designed to maximize profits. In a mutual-benefit firm—the subject of this book—income distribution is tied to members’ participation through use of the cooperative. Owners generally have one vote per member on governance issues, and the income from these types of organizations is either taxed once at the cooperative or mutual level or the income distributed to its members is taxed. Investor benefit firms link income distribution and governance with the proportion of ownership investment, are taxed on their income, and owners are taxed again on any dividend income.