Cooperative Business Principles

Cooperatives March 04, 2011 Print Friendly and PDF

Authors: Greg McKee, North Dakota State University,, and Donald Frederick,
Rural Business-Cooperative Service, USDA

Cooperative Principles

Various writers over the past century have analyzed and observed the application of cooperative principles. Although slight differences in terminology appear on the various lists, three principles emerge as being widely recognized and practiced.

These principles are more than just good practices, policies or common sense. They distinguish a cooperative from other kinds of business. They are also recognized in state and federal statutes and regulations as criteria for a business to qualify as a cooperative.

  • The User-Benefits Principle
  • The User-Owner Principle
  • The User-Control Principle


The above cooperative principles were adapted from Frederickson, Donald, 1997, Cooperative Information Report, USDA,

Related Practices

Certain business practices have developed that implement and facilitate these basic principles. They further differentiate a cooperative from other forms of doing business.

  • Patronage Refund System
  • Limited Return on Equity Capital
  • Cooperation Among Cooperatives

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  • Webinar Information
  • Upcoming Cooperatives Webinars
  • Archived Cooperatives Webinars


  • Rural Cooperatives magazine, Rural Development, Business and Cooperative Programs, USDA - This bimonthly magazine contains articles and news items relevant to agricultural and non-agricultural cooperatives. An archive provides access to past issues of the magazine from 1998 to 2011.
  • Directory of Farmer Cooperatives, Service Report 22, USDA Rural Development, October 2013 - This directory contains a list, by state, of almost 1,500 farmer-owned marketing, farm supply, service, fishery and bargaining cooperatives. The information includes the cooperative’s contact information, type of cooperative and products that they sell. An online directory is updated every month.


This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.