A cooperative association is a business entity formed by individuals for their mutual benefit, and is usually organized under general state business laws or specific state statutes governing cooperative associations. The rights and duties of the members of a cooperative association are governed by state statutes and by the association’s charter or articles of incorporation.

Each shareholder in a cooperative association has equal ownership and an equal share in the control of the association, regardless of the number of shares of stock held by the shareholder. Profit earned by the association is divided among the shareholders based on the amount of their purchases during the period the profit was earned.

In Tennessee, cooperative associations are typically formed under specific state statutes that provide for their creation, governance, and operation. These statutes outline the rights and duties of the members, as well as the procedures for the association's management. Tennessee Code Annotated Title 43, Chapter 26, known as the 'Tennessee Cooperative Act,' is one such statute that governs agricultural cooperatives. However, cooperatives in other sectors may be governed by different statutes or general business laws. The principle of equal ownership and control is a hallmark of cooperative associations, meaning that each member has one vote regardless of the number of shares they hold. Profits, often referred to as 'patronage dividends,' are distributed to members based on their usage or purchases from the cooperative, not based on the number of shares owned. This ensures that the benefits derived from the cooperative are aligned with the members' participation in and contribution to the cooperative's business activities.