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Cooperative

A cooperative (also co-operative or co-op) is a group of persons who join together or co-operate, to carry on an economic activity of mutual benefit.

The term may be used loosely to signify its members' ideology (as in 'jazz coop') but a mainstream cooperative comprises a legal entity owned and democratically controlled by its members, with no passive shareholders, unless they hold non-voting shares. It thus combines the equal control characteristic of many partnerships with the legal personality conferred on corporations. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Unlike a union, in some jurisdictions a cooperative may assign different numbers of votes to different members. However most cooperatives are governed on a strict "one member, one vote" basis, to avoid the concentration of control in an elite. Economic benefits are distributed proportionally according to each member's level of economic interest in the cooperative, for instance by a dividend on sales or purchases. Cooperatives may be generally classified as either consumer or producer cooperatives, depending largely on the mutual interest (see mutual organizations) that their membership shares. Classification is also often based on their function or trade sector.

In the United States most cooperatives are corporations or limited liability companies (LLCs) but other legal entities may also be used. Cooperatives may be for-profit or non-profit. In for-profit cooperatives any surplus may be returned to members by way of a rebate or bonus on their activity with the cooperative, or a dividend on their shareholding in the cooperative.

In the United Kingdom the traditional corporate form taken by cooperatives is the 'bona fide co-operative' under the Industrial and Provident Societies Acts. Since the 1980s, however, many have incorporated under the Companies Acts, limited either by shares or by guarantee. In a bid for sustainability, many cooperatives adopt the principle of 'common ownership', and have a zero or nominal share capital, along with a clause stipulating altruistic dissolution. This means that the cooperative cannot be wound up and its assets distributed for personal profit (see: asset stripping). The facility to legally 'lock' a cooperative's assets in this way was brought into force in 2004.

In the European Union, the European Cooperative Statute will come into force in October 2006, to provide a corporate form for cooperatives with individual or corporate members in at least two of the EU member states.

In the European Union and in large regions of America, cooperatives, with associations, foundations and mutual funds are considered parts of the Social economy.

Worldwide, some 800 million people are members of cooperatives, and it is estimated that cooperatives employ some 100 million people. The cooperative movement often has links and associations with Green politics or Socialist politics, with socially responsible investing, and with the social enterprise movement.

Housing cooperative
A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the co-operative's real estate, or have membership and occupancy rights in a not-for-profit co-operative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent.

Housing cooperatives come in three basic equity structures. In market-rate housing co-ops, members can sell their shares in the co-op whenever they like for whatever price the market will bear, much like any other residential property. Market-rate co-ops are very common in New York City. Limited Equity co-ops, which are often used by affordable housing developers, allow members to own some equity in their home, but limit the sale price of their membership share to that which they bought in for. Provisions are often made for inflation, or improvements made on the building. The purpose of this is to prevent co-op members from using their share in the co-op to speculate on rising real estate prices, and to keep the price of a membership share affordable to future members. In the third structure, called zero-equity or "Group Equity" by the North American Students of Cooperation (NASCO), one of the proponents of this model, individual members do not build up equity in the co-op - the co-op is not owned by its members, but by itself.

Housing cooperatives may occupy various types of physical structure. Co-ops can be structured as individual housing units grouped together, such as in an apartment building, or they can be groups of people living together in one housing unit, as an alternative to the traditional family structure.

Building cooperative
Members of a building cooperative - in Britain known as a self-build housing co-operative - pool resources to build housing, normally using a high proportion of their own labour. When the building is finished, each member is the sole owner of a homestead, and the co-operative may be dissolved.

This collective effort was at the origin of many of Britain's building societies, which however developed into "permanent" mutual savings and loan organisations, a term which persisted in some of their names (such as the former Leeds Permanent). Nowadays such self-building may be financed using a step-by-step mortgage which is released in stages as the building is completed.

The term also refers to workers' co-operatives in the building trade.

Retailers' cooperative
An outlet of a retailers' cooperative.A retailers' cooperative (often known as a secondary or marketing co-operative in the UK) is an organization which employs economies of scale on behalf of its members to get discounts from manufacturers and to pool marketing. It is common for locally-owned grocery stores, hardware stores and pharmacies. In this case the members of the cooperative are businesses rather than individuals.

The well-known Best Western hotel chain is actually a giant cooperative, although it now prefers to call itself a "nonprofit membership association." It gave up on the "cooperative" label after the courts kept insisting on calling it a franchisor despite its nonprofit status.

Utility cooperative
A utility cooperative is a public utility that is owned by its customers. It is a type of consumer cooperative. In the US, many such cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service.

Worker cooperative
Main article: Worker cooperative
A worker cooperative is a cooperative that is wholly owned and democratically controlled by its "worker-owners". There are no outside, or consumer owners, in a worker's cooperative - only the workers own shares of the business. Membership is not compulsory for employees, and only employees can become members. Probably the best known example of worker co-operation is the Mondragón Cooperative Corporation (MCC) in the Basque Country.

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