What is a Patronage Dividend?Members are the Cooperative
Patronage Dividend is the name for how co-ops send profits back to their member-owners. Essentially, each member gets back part of the profit from their own purchases.
Co-ops are distinctive businesses based on member-ownership. While members buy shares to join ($250) the profits are not distributed based on how many shares are owned. Co-op profit is distributed based on how much each member spends at the co-op, that is, their patronage.
Our co-op finds the food and other things that our member-owners want, and sets prices to cover the costs of providing them in a retail store. Every member purchase is recorded in the membership records. Those records are the basis for the patronage refund in profitable years.
Co-op Profit Belongs to the Members
Cooperatives enjoy a privileged status and can return the profit to the member-owners as patronage dividends that are tax free to both the co-op and the members. The cooperative can distribute the patronage refunds to each member-owner as cash or retain a portion as additional investments in the business.
The Board of Directors looks at the financial performance each year, considers the co-op’s financial position and plans for the future. They decide what portion to pay as cash. That portion is given (as a check) with a notice of allocation that also indicates the retained dividend portion and payable in the future at the Boards discretion.
Who is Eligible
To be eligible for a patronage dividend, a member must have shopped as a member-owner in good standing during the fiscal year (Jan-Dec). Checks are available before Sept. 15th of each year.
The check stub will mention the part of the profit Rising Tide is reinvesting in the business, called “retained dividend” The law requires us to let member-owners know about the retained portion of the year’s profits in this manner.