In business, and only in United States corporate law, a limited cooperative association (LCA) is a type of for-profit cooperative which is chartered to allow for outside investment by non-owner members. LCAs combine cooperative principles with elements of partnership and limited liability company principles, and are recognized in several U.S. states. It is a form of multi-stakeholder cooperative.
Aspects A key difference between most cooperatives and an LCA is the latter's recognition of two classes of members: patron members (limited to consumers, workers, producers or others who make use of the cooperative's services and receive membership, as is the case in most traditional cooperatives) and investor members (those who are required to make a contribution to the LCA but are either not permitted or not required by the articles of organization or bylaws to conduct patronage with the LCA).
Another is the minority involvement of investor members in the decision-making process as well as in profits and loss. Under most statutes, investor members may participate in decision making, but patron members must remain the majority of the total voting power in the LCA, and the majority of the board of directors of the LCA must be elected by patron members. In addition, certain decisions require an affirmative vote by a majority of voting patron members in an LCA, such as amendments to articles or bylaws, dissolution, disposition of assets, conversion, or merger of the LCA.
Finally, while LCAs are typically taxed like other for-profit cooperatives under subchapter T of the Internal Revenue Code, an LCA may elect for subchapter K tax status, also known as partnership taxation, in which the LCA is not taxed at the federal level and instead passes income, losses and taxation through to the members. However, subchapter K may be more difficult due to limitations on unallocated reserves, and self-employment taxes.
Legislation by state
The LCA was first promoted under the Wyoming Processing Cooperative Law in 2001 to allow joint ownership by farmers and investors and aid the formation and development of farm producer-owned ventures. Similar legislation was passed in multiple states, with many states adopting the Uniform Limited Cooperative Association Act (ULCAA), which was drafted by the Uniform Law Commission in 2007. +StateDate passedDate in effectLegislationColoradoMay 23, 2011April 2, 2012SB 191IowaMay 20, 2005January 1, 2006HF 859KentuckyApril 23, 2012April 23, 2012HB 441MarylandApril 22, 2025October 1, 2026SB 0144MinnesotaMay 25, 2003August 1, 2003HF 0984NebraskaMay 16, 2007January 1, 2008LB 368OklahomaMarch 20, 2009March 20, 2009HB 2148TennesseeMarch 20, 2004January 1, 2005SB 1161/HB 1675UtahMarch 18, 2008March 18, 2008SB 69VermontApril 20, 2011April 20, 2011HB 21WashingtonApril 17, 2019April 28, 2019SB 5002Washington, D.C.February 27, 2011July 2, 2011Bill No. 18-500WisconsinMay 23, 2006June 5, 2006AB 1186WyomingMarch 1, 2001July 1, 2001HB 0021
Limited worker cooperative association The Illinois General Assembly passed a bill allowing for the creation of limited worker cooperative associations (LCWA), which is a form of LCA which limits patron membership to employees. Similar legislation has been filed in other states. StateDate passedDate in effectLegislationIllinoisAugust 9, 2019January 1, 2020805 ILCS 317/21
Criticism In the magazine Cooperative Grocer, writer Laddie Luschin cautioned against this approach as fundamentally against what coops stand for, even going so far as to label it a "trojan horse" that allows for "coop washing".
See also
Low-profit limited liability company Employee stock ownership plan
References