[monodeldiablo]

Co-ops are rarer for three reasons, chiefly:

1. Less access to capital. Investors want to exchange capital for ownership. Co-ops oppose this model. There are alternative methods for raising cash (subordinated capital campaigns are a successful example), but banks are conservative in nature and are just not eager to underwrite things they aren't very familiar with.

2. Discriminatory taxation. Are co-op member-owners to be taxed at the earned income rate, the capital gains rate, or both? The IRS has intentionally left this unclear and repeatedly refused to give strong guidance, putting co-ops at a distinct disadvantage in paying members and structuring membership.

3. Consistent legal structure. Unlike with the relatively standardized form of the limited liability corporation, the definition of the legal corporate form for co-ops varies widely between states and countries. This lack of standardization makes each incorporation process a custom, costly, time-intensive exercise.

I am of the opinion that cooperatives are a superior legal structure to LLCs for lots of reasons internal and external to the firm. But until these core problems are addressed, cooperatives will remain relatively rare, despite their many advantages.