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. [1] It is a form of Multi-stakeholder co-operative.
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. [2]
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. [3]
| State | Date passed | Date in effect | Legislation |
|---|---|---|---|
| Colorado | May 23, 2011 | April 2, 2012 | SB 191 |
| Iowa | May 20, 2005 | January 1, 2006 | HF 859 |
| Kentucky | April 23, 2012 | April 23, 2012 | HB 441 |
| Minnesota | May 25, 2003 | August 1, 2003 | HF 0984 |
| Nebraska | May 16, 2007 | January 1, 2008 | LB 368 |
| Oklahoma | March 20, 2009 | March 20, 2009 | HB 2148 |
| Tennessee | March 20, 2004 | January 1, 2005 | SB 1161/HB 1675 |
| Utah | March 18, 2008 | March 18, 2008 | SB 69 |
| Vermont | April 20, 2011 | April 20, 2011 | HB 21 |
| Washington | April 17, 2019 | April 28, 2019 | SB 5002 |
| Washington, D.C. | February 27, 2011 | July 2, 2011 | Bill No. 18-500 |
| Wisconsin | May 23, 2006 | June 5, 2006 | AB 1186 |
| Wyoming | March 1, 2001 | July 1, 2001 | HB 0021 |
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. [4] [5] Similar legislation has been filed in other states.
| State | Date passed | Date in effect | Legislation |
|---|---|---|---|
| Illinois | 9 August 2019 | 1 January 2020 | 805 ILCS 317/21 |
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.” [6]
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