Glossary of Useful Terms

  • Assets– resources with an economic (typically monetary) value that an individual, or business has ownership of.
  • Board of Directors– the individuals that serve as the governing body of the organization.
  • Bylaws– the document that regulates the governance and internal affairs of a corporation.
  • California Corporations Code– state law governing formation and operation of business entities.
  • Capital– money used in a business, whether supplied by owners (equity) or borrowed (debt).
  • Capitalization– the amount and source of money needed to start and operate the cooperative.
  • Collateral– asset used to secure a loan.
  • Debt Financing– obtaining money for a business by borrowing from a bank or other lender. While some collateral may be required to obtain the loan, the lender does not have any ownership or direct control of the business affairs, except in certain instances of default.
  • Dividend– amount paid to business owners based on their investment. Typically, dividends represent a portion of profits paid to members proportionate to the shares held. In a worker cooperative, patronage “dividends” are also distributed on the basis of patronage with the cooperative, usually determined by wages earned or hours worked.
  • Equity– the ownership interest in a business, typically calculated by subtracting all liabilities (amounts owed) from all assets (amounts and property owed). Equity is generally made up of investments by worker-owners, other than loans, and the cumulative profits of the business.
  • Equity Capital– money supplied by the owners of a business, which is used towards financing the various needs of the business.
  • Governance– this refers to the way a company is controlled and how decisions are made.
  • Liabilities– a financial obligation that arises out of a prior transaction.
  • Limited liability entity– this refers to a type of business that provides extra protection to its owners if it is sued. The owners of a limited liability business, if sued, may lose the business, but in most cases, will not lose their personal assets.
  • Margins- in cooperative terminology, net income is often referred to as “margins.”
  • Officers– executive agents of the business, responsible for certain duties, such as signing documents, keeping meeting minutes, providing notices, signing checks, and so on.
  • Operating Agreement– the document that regulates the internal affairs and governance of an LLC.
  • Profits– in the context of California cooperative corporations, this is defined as  the excess of revenues over expenses for a fiscal year attributable to non-Member labor.
  • Revenue– income that a business receives from normal business activities.
  • Revolving Capital Accounts– written notices of allocation that are paid to members on a first-in, first-out basis, rather than upon termination of membership or fixed maturity dates. Dates of redemption are generally flexible and controlled by the board or other designated decision-making body.
  • Revolving Funds– funds made available for cooperative and business investment purposes by some public agencies or nonprofit organization. These may be borrowed and then repaid on specified terms so that others may borrow the money at a later time.
  • Surplus- in the context of California cooperative corporations, this is the net income that is attributable to member labor.
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