During the 2015-16 fiscal year Friendly City Food Co-op was profitable beyond projections (and well-ahead of many other start-up food co-ops), allowing for patronage dividends to be paid out for the first time. On February 9th, 2017, the Board of Directors voted to authorize the pay out of 20% of the store profits derived from sales to owners in the form of patronage dividends. The other 80% will be retained for re-investment in the co-op’s future success (potential expansion, debt repayment).
Frequently Asked Questions
What is a Patronage Dividend?
When Co-ops make a profit, the Board may vote to declare a percentage of the surplus to the Owners. The profit is allocated in direct proportion to a co-op Owner’s purchases in that fiscal year and the allocation is called a “Patronage Dividend.” Simply put– the more you shop, the more you receive.
Why does the Co-op retain a percentage of the Patronage Dividend?
A percentage of the Patronage Dividend is retained and used by the Co-op to operate, to grow (there is a plan for store expansion in the next few years), and to achieve our Ends Policy. With the help of the retained earnings, the co-op is on track to have start-up debt repaid by April of 2021!
What will influence the potential amount of my Patronage Dividend in future years?
Your dividend is related to how much you shop at the Co-op, how successful we are as a business, and the expenses we face in a given year. The more successful we are, and the more you contribute to that success, the more you could get refunded. Please be sure to present your owner card, or give the cashier your last name, so your purchases can be rung up under your account.
How are my purchases recorded?
In order to record your purchase, present your owner card to the cashier. All merchandise rung through under your account is recorded by our system.
Do I have to pay income taxes on my patronage dividend refund?
Patronage dividend refunds are not taxable income unless your purchases were for purposes other than personal use. If this is the case for you, please consult your tax advisor.
What are the advantages of patronage dividends?
1. Patronage dividends are a fiscally responsible way to manage the co-op’s profits—patronage dividends are disbursed at the end of the year only after the co-op knows it made a profit.
2. Retaining a portion of patronage dividends enables the co-op to prioritize saving for the future by funding capital improvements out of co-op profits instead of relying on outside debt.
3. Refund of patronage dividends to Owners allows a portion of profits to be reinvested in the co-op tax-free. This is a significant tax advantage because the co-op doesn’t pay tax on profit allocated to patronage dividends.
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