Organize a producer or marketing cooperative under chapter 308B

Who this is for#

Farmers, makers and other producers who want to market, process or add value to what they produce together, and the people drafting their documents.

The short answer#

Chapter 308B expressly permits a cooperative to “market, process, or otherwise change the form or marketability of products, including agricultural products.” It also permits other lawful cooperative purposes; this is not a separately defined statutory producer-cooperative entity ^{P1, § 308B.201}.

The product-processing language is an express statutory purpose, not evidence by itself of legislative intent or the chapter's drafting history. Other lawful cooperative businesses are also authorized § 308B.201 ^P1.

What the statute gives you#

• Patron-member control. A patron member is entitled to one vote on matters put to patron members, unless the articles or bylaws give additional votes based on patronage criteria; patron members vote collectively, and the bylaws cannot reduce their collective vote below 15 percent of the total vote ^{P1, § 308B.545, subd. 1}. If your members deliver very different volumes, consider whether patronage-based votes fit [OPINION]. See Member voting rules in Chapter 308B.
• Economic floor for patrons. Patron interests collectively hold at least 60 percent of financial rights to profit allocations and distributions, or at least 15 percent if authorized as the statute requires ^{P1, § 308B.601, subd. 3}.
• Outside capital. Chapter 308B recognizes nonpatron membership interests. [INFERENCE] That is the mechanism a processing venture would use to bring in investors who do not deliver product. See Raise member equity and capital.

What your bylaws must decide#

1. What counts as patronage: bushels, pounds, dollars of product marketed, or something else. The statute leaves this to you ^{P1, § 308B.005, subd. 21}.
2. Delivery commitments and agricultural marketing contracts. § 308B.311 expressly governs qualifying contracts: initial terms may not exceed ten years, with additional periods up to five years and the specified termination opportunity; it also addresses remedies for breach and liens. Have counsel apply those rules to any exclusive-delivery or marketing agreement rather than assume the chapter supplies none ^P1.
3. How patronage is allocated and paid, and the treatment of non-member business. See Allocate patronage and make distributions.
4. Whether nonpatron investors are allowed, in which class, with what voting and financial rights.

Formation#

The SOS articles form has no cooperative-type field ^G1. For the steps, see Form a Minnesota cooperative under Chapter 308B.

Farming and agricultural land are a separate eligibility question#

The displayed 2025 version of § 500.24 distinguishes agricultural production from processing, refining and packaging, which its definition of “farming” excludes. But “agricultural land” includes land used or capable of use for farming. A processing business therefore cannot assume its land acquisition or lease is outside the statute simply because processing itself is excluded ^{B3, subd. 2(a), (g)}.

Subdivision 3 restricts specified entities' farming and agricultural-land interests, with defined exceptions, conservation-plan/reporting conditions and a commissioner-exemption process. Do not assume chapter 308B formation itself supplies an exception. Have counsel and MDA determine how the entity, activity and property fit before acquiring land or commencing farming ^{B3, subd. 3}.

For entities required to report under subdivision 4, the displayed statute requires annual reporting prior to April 15, a $15 report filing fee, and provides a $500 civil penalty for failure to file by April 15, with a good-cause waiver/reduction provision. It also requires certification before specified entities commence farming. These are not universal charges or deadlines for every cooperative. MDA's instructions distinguish initial applications from annual renewals ^{B3, subd. 4 R12}.

Common mistakes#

1. Assuming agricultural tax exemptions apply automatically on formation. The IRS instructions for Form 1120-C treat section 521 status as something you apply for and receive ^G4.
2. Giving every producer one vote without deciding whether patronage voting fits better.
3. Not planning how outside capital, if any, will be raised legally.