What is the Tennessee Processing Cooperative Law?

The "Tennessee Processing Cooperative Law" provides new opportunities for Tennessee farmers. These include new market opportunities for farm commodities and the opportunity for investment in a value-added processing business. The new law is intended to encourage business formations that will add value to farm commodities and agricultural resources in Tennessee.

Basically, the new law provides for the establishment of a new business structure specifically for businesses that will add value to Tennessee agriculture commodities by processing or marketing. The new business structure can be described as a hybrid between a traditional cooperative and a Limited Liability Company (LLC). A business formed under the law will follow traditional cooperative organization principles and will be exempt from state franchise and excise taxes, similar to traditional cooperatives, but will accommodate both patron and non-patron membership.

A business organized under the new law can raise start-up capital from farmers ( patrons) and investors (non-patrons) with both having membership rights in the cooperative.

The new law provides a legal business structure that allows farmers to cooperate with each other to obtain the required quantities of agricultural commodities for a processing operation and to supplement their capital investment with capital from outside investors.