Structuring Your Cooperative for the Future
By: Dennis Gardiner, Partner | email
Our cooperative clients have been very successful for the past several years. The result of these profitable years, the use of the Section 199 deduction and bonus depreciation have helped to strengthen coop balance sheets. But is it enough? The cost of mega-fertilizer plants, speed and space in grain storage, and the race for securing bushels, is beginning to strain balance sheets. Are you going to have to pass on opportunities, or set projects on the back burner to allow them to fit into your long-term capital expenditures budget?
Because of some of the issues cited above, we have seen an uptick in the interest in the Limited Cooperative Association organizational structure. Also, due to the success of the ag-sector, we are learning of an interest in outside investors to place equity in farmer cooperatives. Unfortunately, almost all of you would not be able take these dollars today. The time may be here to consider investigating a conversion to a Limited Cooperative Association. For Gardiner Thomsen clients in Iowa, Minnesota and Nebraska these laws have been adopted.
The Limited Cooperative association structure would allow you the flexibility to accept outside investor equity. The outside equity may afford your cooperative the advantage of timely opportunities or to balance your debt and equity capital structure. We are not encouraging this structure for all of our cooperatives, but we have seen enough through the last 48 years to know that it is worth considering; particularly as our cooperative clients continue to grow. We are not attorneys, so we would have to direct you to the legal resources to address the details. Contact your Gardiner Thomsen partner or manager if you would like to start the discussion.