- -   AGRICULTURE CORE CURRICULUM   - -

(CLF1000)  Advanced Core Cluster:  AGRICULTURAL BUSINESS MANAGEMENT

    (CLF1500)  Unit Title:  COOPERATIVES

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    (CLF1501)  Topic:  COOPERATIVES COMPARED TO       Time        Year(s)
                       OTHER BUSINESS FORMS           1 Hour            3/4
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           Topic Objectives:  Upon completion of this lesson the student
                              will be able to:

           Learning Outcome #:

              (M-3)  -  Explain how local and regional cooperatives are 
                        organized to serve members.

              (M-5)  -  Examine some of the challenges and opportunities that
                        face agricultural cooperatives.

           Special Materials and Equipment:  

           References:  Agricultural Council of California.  EXPLORING FARMER 
                          COOPERATIVES (Chapter 1).

           Evaluation:  Unit Exam
 
TOPIC PRESENTATION:  COOPERATIVES COMPARED TO OTHER BUSINESS FORMS

A.  Individually-owned Business

    1.  This is the most common type of business organization.

    2.  The source of capital is the individual's own money.

    3.  If the business fails, the individual alone is responsible.

    4.  The owner may lose all assets, including personal property.

    5.  The owner makes business policies and is responsible for management.

    6.  All profits accrue to the owner.

B.  Advantages of Individually-owned Business

    1.  It is a very flexible method of doing business.

    2.  It offers great opportunity for individual initiative.

    3.  It is best adopted for firms requiring small amounts of capital.

C.  Disadvantages of Individually-owned Business

    1.  It is difficult to enter a business that requires large amounts of 
        capital.

D.  Partnerships

    1.  There can be any number of partners.

    2.  Partner shares do not have to be equal.

    3.  Profits are distributed according to share of contribution (labor and 
        capital).

    4.  Decisions are usually made on majority vote.

    5.  If the business fails, partners are liable for debts of the
        partnership, regardless of individual's original contribution to 
        partnership.

E.  Advantages of Partnerships

    1.  Partnership aids in accumulation of adequate skills and capital.

    2.  It is less expensive to set up than a corporation.

F.  Disadvantages of Partnerships

    1.  A large number of partners makes management unwieldy.

    2.  When one partner withdraws or dies, the partnership must be 
        reorganized.

G.  Ordinary Business Corporation

    1.  It is legally treated as an individual.

    2.  The corporation can own property, borrow money, and enter contracts.

    3.  It is organized to make a profit.

    4.  It serves non-owner customers.

    5.  It has an indefinite life.

    6.  Policy is decided by a board of directors elected by the stockholders.

    7.  Articles of incorporation define the scope of the corporation's 
        activities.

    8.  The business is conducted by paid staff hired by the corporation's 
        board of directors.

    9.  Each stockholder has as many votes as the number of shares owned.

   10.  Profits are distributed to shareholders based on share ownership.

   11.  If the corporation fails, stockholders' losses are limited to the 
        amount invested in stock.

H.  Advantages of Corporations

    1.  They are able to amass large amounts of capital under central control.

    2.  Stockholders have limited liability.

I.  Disadvantages of Corporations

    1.  This form of business sometimes creates a large impersonal 
        bureaucracy.

J.  Cooperative Business Corporation

    1.  It is a legal person like an ordinary corporation.

    2.  It exists only to serve member-owners.

    3.  It is user-owned.

    4.  It is user-controlled through the election of a board of directors.

    5.  Users benefit through service at cost.

    6.  Any profits returned to the members are based on use of the 
        cooperative.

    7.  Liability is limited to capital invested in the cooperative.

    8.  The board of directors hires staff who handle day-to-day operations.

    9.  Basic policy questions are decided by members.

   10.  The policy is usually one member, one vote.

   11.  Interest or dividends paid are limited to 8 percent by law.

K.  Advantages of Cooperatives

    1.  Cooperatives help improve members' net income through group action.

    2.  They add another level of production to the farm firm.

L.  Disadvantages of Cooperatives

    1.  Cooperatives tend to react slowly to changing business and economic 
        conditions.

    2.  Growth capital tends to be limited in many cooperatives.


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       ACTIVITY:

         1.  Complete a chart or matrix that will show the differences 
             in the four types of business organization.

         2.  Divide the class into five groups and assign a type of 
             business to four of the groups.  Give them a few minutes 
             to collect their ideas, then have them discuss with the rest 
             of the class the facts about their type of business.  Tell the 
             fifth group it is in a business in a centrally controlled 
             country such as China.  Let them come up with their own ideas 
             about who operates the business.  In a socialistic country, the 
             government may own and operate the business.
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11/26/91  CM/ch


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