To Join the Cooperative:
- A member must be an agriculture producer.
- There is no minimum percentage of a member’s income that must be derived from agriculture to qualify.
- IRS determines an agricultural producer to be “the owner or tenant of a farm, bears the risk of production and cultivates, operates or manages the farm for gain or profit.”
- To join you must submit an application for membership form with $1 to purchase one share of Commonstock.
- The application is presented to the Board of Directors and if approved one share of Commonstock is issued.
- Lifetime membership for $1 - - as long as the member continues to purchase agricultural products from Farm Supply he/she will continue as a member.
Ownership – Voting Rights:
- Commonstock members are owners of Farm Supply Company.
- Each member’s ownership is based on the amount of money he/she has in the revolving fund (retained member capital).
- Each member has one vote. Members vote annually to elect the board members and occasionally to make changes to the Articles of Incorporation.
- Yearly profit is divided between member profit and non-member profit at the same percentage as member and non-member sales.
- Dividends are declared for members whose annual purchases are greater than $1000.
- Declared dividends are allocated to each member as a percentage of their purchases made during the year. For example, if the dividend is 3% and the purchases are $10,000 then a $300 dividend is allocated to that member. These dividends are taxable in the year in which they are allocated.
- 30% of the allocated dividend is paid to the member either by check or as a credit against his/her charge account in that year (usually late summer).
- 70% of the allocated dividend is placed in the revolving fund as member equity in Farm Supply.
- Revolving Funds are so named because it is the intention of the cooperative to pay out (or revolve out) these dividends at a later date. When these revolving funds are paid out they are not taxable.
- Member equity allows Farm Supply to borrow money to continue to do business. Member equity is paid out only when there is sufficient equity to do so, with approval of the Board of Directors.
- The revolving fund is paid to all the members at the same time by the year in which it was retained. There is no mobility for a member to withdraw his/her equity before the other members receive their distribution.