Profits generated by the business are distributed to members through patronage dividends. This describes which business form?

Profits generated by the business are distributed to members through patronage dividends. This describes which business form?

• A. Cooperative
• B. Limited Liability Company
• C. Corporation
• D. Partnership

Answer: (A)

Patronage dividends are distributed to members based on how much they use the business, which is a hallmark of cooperatives. In a cooperative, profits are earned for and by the members and returned to them in proportion to their patronage rather than their capital investment. This contrasts with other business forms where profits go to owners or partners according to ownership shares or partnership agreements, not according to how much members participate in the cooperative’s business. So the description fits a cooperative best.

Patronage dividends are distributed to members based on how much they use the business, which is a hallmark of cooperatives. In a cooperative, profits are earned for and by the members and returned to them in proportion to their patronage rather than their capital investment. This contrasts with other business forms where profits go to owners or partners according to ownership shares or partnership agreements, not according to how much members participate in the cooperative’s business. So the description fits a cooperative best.