As a legal form, the cooperative is much less common than the sole proprietorship or a private company. It is a legal form that is very similar to an association. For example, a cooperative is also founded on the basis of a notarial deed. The members are other entrepreneurs who seek cooperation. The main difference with an association is that in a cooperative profit may be distributed among the members. Although cooperatives are relatively rare as a legal form compared to some other legal forms, there are a number of very well-known ones. Infra Bank, FrieslandCampina and insurance company Univé, for example, are all cooperatives.
Many similarities with an association
The legal structure of an association is the foundation of a cooperative. This is clear from the legal provisions that a cooperative must comply with. Just like an association, a cooperative has members. However, an association is not suitable as a legal form for a company, because no profit may be distributed to its members. This is allowed in a cooperative. Another difference with the association is that in a cooperative written agreements are made with the members about the contributions they make to the cooperative. These agreements are binding.
There are all kinds of cooperatives. In every kind of cooperative, the members work together in a different way. We take a look at the two most important. In a business cooperative, the members work together on the products and services provided by the cooperative. The cooperative is responsible for business interests and is engaged in, for example, purchasing and advertising. Large dairy cooperatives are perhaps the best-known example of a corporate cooperative. The products are sold under the name of the cooperative and the members, the farmers who supply the milk, share in the profit.
Another form of cooperative cooperation exists in the entrepreneurial cooperative. It consists of members, who each keep their own independence, but work on projects within the cooperative. Self-employed people are often very successful part of entrepreneurial cooperatives. Their aim is to accept large projects, which are carried out by the self-employed, each based on their own expertise. The attractive thing for the self-employed is that they cannot secure such large projects as a small company. This is possible as part of an entrepreneurial cooperative. The advantage for the customer is that he has one point of contact with an entrepreneurial cooperative, and more certainty about the timely completion of the project.
If you are a self-employed person who participates in an entrepreneurial cooperative, you must be aware that you also continue to work for other clients. If you do not do this, you run the risk that the tax authorities no longer regard you as an entrepreneur for income tax purposes, but as an employee of a company. To prevent this, you can use model agreements. These have been developed by the Tax and Customs Administration. This prevents the activities of a self-employed person from being regarded as an employment relationship for the cooperative.
In a cooperative you can influence the degree of liability that the members bear for any shortages. You can see for which degree of liability a cooperative opts from the abbreviations behind the name. At UA, which stands for Exclusion of Liability, members do not run any personal risk. BA stands for Limited Liability and WA stands for Legal Liability. Cooperatives are obliged to state the status of liability after their name in all correspondence, except in complaints. The Infra Bank is a good example of this. The official name is Coöperatieve Centrale Raiffeisen-Boerenleenbank BA
'Cooperative' in the name
As a cooperative, it is mandatory for you to make it clear in the name that your customers are dealing with a cooperative. This is usually done by using the word 'cooperative' or 'cooperative' first. Because the name 'cooperative' has also been associated with qualifications such as reliability and quality over time, companies that are not cooperatives sometimes want to put that in their name. That is prohibited. It can even be enforced in court that such a company must stop using the term 'cooperative' unlawfully.
Establishment of a cooperative
Founding a cooperative is the same as an association. You can do that if you have at least one partner. First, a notarial deed is drawn up at the notary. The cooperative is then registered in the Trade Register at the Chamber of Commerce. The members of the cooperative jointly pay the costs for the establishment and maintenance of the cooperative. It is not possible to hire staff as a cooperative. If there is work to be done, it is a task for the members. Of course it is possible to hire new members.
Part of the notarial deed are the articles of association, with the name, place of business and a description of the objective. The rights and obligations of the members towards the cooperative are also established. In addition, the procedure for convening the General Members' Meeting is explained and a passage is included on the manner in which directors can be appointed or dismissed. Make sure that you do not forget to register this deed with the Trade Register, because in that case you are jointly and severally liable as founder and director.
Division of powers
The powers in a cooperative are broadly divided in the same way as in an association. The board is responsible for the daily ins and outs of the cooperative. All powers, which do not rest with the board or other committees, belong to the members of the General Members Meeting. Each member has one vote in a cooperative. In this respect, a cooperative differs from a private company and a public limited company. Because in these legal forms, the voting right is related to the degree to which capital is invested in the company. The greater the number of shares, the more influence.
A cooperative itself can decide to set up a supervisory board. But there are also circumstances that make it a legal obligation to set up a supervisory board. This is the case if the cooperative has reached a certain size in terms of capital and number of members. The main task of such a supervisory board is to monitor the management. Important board decisions must also be endorsed by the supervisory board. In principle, a supervisory board even has the power to suspend and appoint directors. The General Members Meeting appoints the members of the supervisory board, but the aspiring supervisory directors are nominated by the board.
Differences with NV and Ltd
A cooperative, a limited liability company and a private limited company are all three legal forms that are suitable for conducting a business. Although it is already embedded in the name of a cooperative that it concerns a collaboration between different parties, this is also possible with a Ltd and an NV. After all, there may be several shareholders. There need also be no difference in the degree of liability between the three legal forms. What are the reasons for choosing a cooperative anyway? This is a choice that must be made on the basis of tax and legal motives, and the personal preferences of the founders.
In a public limited company and a private limited company it is fairly compulsory to determine how the company should take shape. It cannot be deviated from. In a cooperative there is a much greater degree of freedom to organize the company as it sees fit. Another reason for choosing a cooperative is that it is much easier to let members join and leave. With a Ltd or NV this means that shares have to change hands. Another reason to choose a cooperative is that it is fiscally more advantageous in certain cases.
A cooperative also has disadvantages compared to a limited liability company and a private company. A NV and Ltd can be established by one person; a minimum of two people are required to set up a cooperative. Some also find it annoying that the voting rights in a cooperative are limited. For a NV and Ltd the influence on the company is related to the invested capital, ie the number of shares. The last disadvantage of a cooperative is the way in which the cooperation with the members is arranged. It is mandatory to draw up an agreement for this with every member. That can be quite time consuming.
Cooperative and taxes
In a cooperative, corporate tax must be paid on the taxable profit; 20% on the first $ 200,000 and 25% on the rest. Not all profit that is made is taxable. Part of the profit is achieved thanks to the activities of the members of the cooperative. That's called the extension gain. This extension win may be deducted from the total win. The result is that the cooperative has to pay less corporate tax. They each pay income tax on the profit received by the members of the cooperative.
You can make use of deductible items at a cooperative. These are settled through corporate tax. An example of this is the investment deduction, which you may apply for the purchase of business assets. This is interesting in combination with the option of arbitrarily depreciating company assets. By writing off more investment costs for a business asset in a specific financial year, you will therefore also receive a larger investment deduction. If your cooperative is involved in the development of new products, you can claim the Research Development deduction. This is a deductible item that can only be used after approval by NL Agency.
Preparation of the annual accounts
A cooperative is obliged to prepare annual accounts. That's a final report of how you performed financially in the previous year. As the cooperative becomes larger and more profitable, more requirements are imposed on the annual accounts. In any case, you must include the following information. First, the balance. That is a snapshot of the cooperative's financial status at any given time. The profit and loss account, or an overview of all income and expenditure, is also essential. Third, an explanation of the financial information must be added. When the annual accounts are ready, you must file them with the Chamber of Commerce.
Filing annual accounts
The actual filing of the annual accounts is very simple. It has been legally required to do this digitally for a number of years. How that should be done also depends on the size of the cooperative. Small organizations can file annual accounts via an online self-service. Another suitable method for small cooperatives is the SBR method. This is a method in which the annual accounts are first drawn up and then sent to all relevant organizations. Think of the tax authorities, the CBS and banks .
What category does my cooperative fall under?
As stated earlier, it depends on the size of the company which information must be included in the annual accounts. The Chamber of Commerce applies the following criteria for this.
|Micro||<$ 350,000||<$ 700,000||<10 people|
|Small||$ 350,000 - $ 6 Mill||$ 700,000 - $ 12 Mill||10 - 50 people|
|Medium||$ 6 - $ 20 mln||$ 12- $ 40 mln||50 - 250 people|
|Big||> $ 20 mln||> $ 40 mln||> 250 people|
Source: Chamber of Commerce
Size of the annual report by company size
For micro small and small companies, it is sufficient if their annual accounts contain a limited or abridged balance sheet with a limited explanation. A management report is required for medium and large companies. The annual report itself sometimes requires many elements, which makes drawing up the annual accounts considerably more complicated. The overview below shows which elements are required by medium and large companies.
|Financial Statements||Medium size||Big|
|Slightly simplified balance||X|
|Simplified profit and loss account||X|
|Extensive profit and loss account||X|
|Other information||Medium size||Big|
|Special rights regarding control in the legal person||X|
|Number of profit certificates and the like||X||X|
|Important events after the end of the financial year||X||X|
|Branch offices, their names and countries of residence||X|
|Statutory regulation and proposal for profit appropriation or processing loss||X||X|
Source: Chamber of Commerce
Keep a close eye on the deadline
The deadlines with which the annual accounts are drawn up is something to keep a close eye on. If your cooperative goes bankrupt or you forget to file the annual accounts on time, you and your co-directors may be held personally liable for this. An investigation can also be initiated by the Economic Enforcement Bureau at the request of the Tax Authorities. This can lead to a criminal conviction, with the necessary financial consequences. Fines can be as high as thousands of US dollars. Sufficient reason not to exceed the deadline.
Which deadline is important?
The process of filing an annual account consists of a number of steps. At the end of the financial year, as a board member, you have five months to prepare annual accounts and submit them to the General Members Meeting. They in turn have two months to adopt the annual accounts. The annual accounts must be filed with the Chamber of Commerce eight days after adoption. Normally this is on July 31 of the following calendar year. It is possible to get a maximum delay of 6 months for the preparation of the annual accounts, provided that the members agree to this.
Advantages and disadvantages of a cooperative
The great advantage of a cooperative is that there are members that can be cooperated with. This is done by dealing with formal decisions during the General Members Meeting. Another advantage of a cooperative is that the joint interest of the members ensures that continuity is better guaranteed. Collaboration can also lead to economies of scale. A disadvantage of the democratic form of cooperation is that it sometimes takes longer for decisions to be ratified. This is partly because the interests of the cooperative and its members can clash. Another drawback is that setting up a cooperative can be quite time consuming.