In North Carolina, the North Carolina Business Corporation Act (NCBC Act), specifically Chapter 55 of the General Statutes, governs the formation and operation of corporations, including cooperatives. While the NCBC Act provides the foundational framework, cooperatives often operate under specific provisions that address their unique member-driven structure and democratic control. When a cooperative faces a situation where a member’s actions might warrant exclusion, the process is typically detailed in the cooperative’s articles of incorporation, bylaws, and potentially in specific state statutes that permit such actions under defined circumstances. The NCBC Act, in G.S. 55-7-31, addresses the termination of membership. This statute generally requires that the termination be in accordance with the articles of incorporation or bylaws. For a cooperative, the grounds for termination are often tied to a member’s failure to meet membership requirements, engaging in activities detrimental to the cooperative’s purpose, or violating specific cooperative principles as outlined in its governing documents. The decision to terminate membership is a serious matter and usually involves a process that allows for notice and an opportunity for the member to be heard, aligning with principles of fairness and due process, even within a private association. The specific grounds and procedures are paramount, and without them being clearly established and followed, termination could be challenged.

The North Carolina General Statutes, specifically Chapter 54A, governs credit unions. Article 3 of this chapter details the requirements for the organization and operation of credit unions. Section 54A-22 outlines the powers of the credit union board of directors. These powers include the authority to approve applications for membership, establish dividend rates, set loan policies, and appoint officers. The statute also specifies that the board must hold regular meetings and maintain minutes. The question probes the understanding of which entity is primarily responsible for the day-to-day operational oversight and strategic decision-making within a North Carolina credit union, as defined by the governing statutes. The board of directors, as established by the charter and bylaws and empowered by state law, holds this ultimate responsibility. The credit union manager or president is an officer appointed by the board to execute its directives and manage operations, but the strategic and policy-setting authority rests with the board. The members, while the ultimate owners, do not directly manage operations. Regulators, such as the Commissioner of Banks in North Carolina, provide oversight and enforce compliance but do not manage the internal operations of individual credit unions. Therefore, the board of directors is the correct answer.

The North Carolina General Statutes, specifically Chapter 54, govern cooperative associations. When a cooperative association, such as a agricultural marketing cooperative, is dissolved, the distribution of its remaining assets after paying debts and liabilities follows a specific order. The statutes generally prioritize the return of member contributions or capital, often in proportion to their original investment or patronage. Any remaining surplus is then typically distributed among members based on their patronage during the period preceding dissolution, or as otherwise provided in the association’s articles of incorporation or bylaws. In the absence of specific provisions in the articles or bylaws, North Carolina law dictates a pro-rata distribution based on patronage. Therefore, after all debts and expenses are settled, the remaining net assets are distributed to members according to their patronage during the relevant period.

The North Carolina General Statutes Chapter 54A, Section 54A-26, outlines the requirements for the establishment of credit unions. Specifically, it addresses the minimum number of members required to form a credit union. For a credit union to be chartered and operate in North Carolina, it must have at least one thousand members. This foundational requirement ensures that the credit union has a sufficient member base to operate viably and serve its members effectively. The statute also details other formation requirements, such as the submission of articles of incorporation and bylaws, and approval from the Commissioner of Banks. However, the numerical threshold for initial membership is a critical prerequisite for chartering.

In North Carolina, a cooperative association formed under Chapter 54 of the General Statutes has specific provisions regarding member voting rights, particularly when a member has multiple classes of membership or varying levels of patronage. The General Assembly has empowered cooperatives to define voting structures in their articles of incorporation or bylaws, allowing for deviations from the one-member-one-vote principle. These deviations are typically tied to the member’s patronage or investment in the cooperative, ensuring that voting power reflects a member’s stake or activity. For instance, a cooperative might grant additional votes based on the volume of business a member conducts with the association. However, any such deviation must be clearly articulated and consistently applied according to the cooperative’s governing documents. The law requires that these provisions be equitable and not designed to disenfranchise members or create an unfair advantage for a select few. Therefore, a member holding multiple types of membership or exhibiting different levels of patronage can indeed possess more than one vote, provided the cooperative’s governing documents explicitly permit and define the conditions for such differentiated voting rights. This flexibility is a cornerstone of cooperative governance, enabling associations to tailor their structures to their unique operational needs and member relationships.

The question concerns the dissolution of a cooperative in North Carolina, specifically focusing on the process after a judicial decree. North Carolina General Statute §54-186 outlines the procedures for winding up a cooperative’s affairs. When a court orders dissolution, it typically appoints a receiver to manage the process. The receiver’s primary duty is to collect the cooperative’s assets, pay off its debts and liabilities, and then distribute any remaining surplus to the members according to the cooperative’s bylaws or, if the bylaws are silent, in proportion to their patronage or contributions. This distribution is a crucial step in ensuring that the cooperative’s assets are handled equitably among its stakeholders. The statute emphasizes that after all debts are paid, any remaining assets are to be distributed to the members. This process is distinct from the initial formation or ongoing operations of the cooperative and is specifically tied to the termination of its legal existence following a court order. The receiver acts under the court’s supervision to ensure a orderly and legal conclusion to the cooperative’s business.

In North Carolina, the legal framework governing cooperatives, particularly the North Carolina Farm and Other Cooperative Corporations Act (N.C. Gen. Stat. Chapter 54, Article 2), outlines the rights and responsibilities of members. When a cooperative faces a situation where a member’s actions are deemed detrimental to the cooperative’s operations or its membership, the cooperative’s bylaws, as permitted by statute, typically provide the mechanism for addressing such conduct. This often involves a formal process for member discipline, which may include suspension or expulsion. The Act itself does not mandate a specific monetary penalty for such conduct but empowers the cooperative to establish rules for member conduct and to enforce them. Therefore, a cooperative’s bylaws would be the primary source for detailing the procedures and potential consequences for a member whose actions, such as divulging confidential strategic plans to a competitor, are found to be harmful. The Act provides the overarching authority for cooperatives to govern themselves, including the adoption of bylaws that address member conduct and the remedies for breaches of that conduct. The specific penalties are determined by the cooperative’s own governing documents, which must be consistent with state law.

The North Carolina General Statutes Chapter 54A, governing cooperative agricultural associations, outlines the requirements for member representation and voting. Specifically, the statute addresses how voting rights are allocated to ensure fair representation. When a cooperative has members who contribute capital in different amounts or through different means, the cooperative’s bylaws can establish a voting structure that deviates from a strict one-member-one-vote principle. Such a structure might allocate voting power based on patronage, capital contribution, or a combination thereof, provided it is clearly defined in the bylaws and does not unfairly disenfranchise any class of members. The key is that the method of voting must be equitable and transparent, as established by the cooperative’s governing documents, which are subject to state law. The statute does not mandate a singular voting method but allows for flexibility within legal parameters. Therefore, a cooperative’s bylaws can specify that members with greater capital investment receive proportionally more votes, up to a certain limit, to reflect their stake in the association’s financial well-being and to encourage capital formation. This approach aims to balance the democratic ideal of member participation with the economic realities of capital-intensive operations.

The North Carolina General Statutes, specifically Chapter 54A, governs the formation, operation, and dissolution of credit unions. A key aspect of credit union governance involves the selection and duties of the board of directors. When a vacancy occurs on the board of a credit union chartered in North Carolina, the bylaws typically dictate the process for filling that vacancy. Common provisions allow the remaining directors to fill the vacancy by appointment until the next annual meeting of members, at which point a member is elected to serve the remainder of the unexpired term. This ensures continuity in leadership while maintaining member oversight. The statute aims to balance operational efficiency with democratic member control, reflecting the cooperative principles upon which credit unions are founded. The duration of the appointed director’s term is crucial, as it is limited to the period until the members can elect a replacement, thereby reinforcing the membership’s ultimate authority.

The North Carolina General Statutes Chapter 54, specifically Article 20 concerning cooperative agricultural associations, outlines the framework for their formation and operation. A key aspect is the governance structure and the rights of members. When a cooperative association is formed under these statutes, the members typically have voting rights based on their membership, not necessarily on the volume of business they conduct with the cooperative. This is a fundamental principle of cooperative governance, often referred to as “one member, one vote,” though specific bylaws can sometimes introduce variations like voting based on patronage or capital contribution, but these variations are generally subject to statutory limitations and the cooperative’s own governing documents. In the absence of specific provisions in the bylaws to the contrary, or if the bylaws are silent on the matter, the default understanding of member participation in a cooperative is based on individual membership. Therefore, if an association’s bylaws do not explicitly stipulate a different voting mechanism, each member holds an equal vote, irrespective of their transactional volume with the cooperative. This principle aims to ensure democratic control and prevent dominance by a few large patrons. The statutes provide a baseline, but the cooperative’s own adopted bylaws further define these operational aspects, ensuring they align with the overarching cooperative principles and North Carolina law.

The North Carolina General Statutes Chapter 54A, concerning credit unions, outlines specific requirements for the organization and operation of these financial institutions. Article 3 of this chapter, specifically GS 54A-22, addresses the requirements for the organization of a credit union. This statute mandates that a minimum of five persons must sign the articles of incorporation. These individuals are typically referred to as the incorporators. The articles of incorporation serve as the foundational document that legally establishes the credit union. This document must be filed with the Commissioner of Banks, who then reviews it for compliance with all applicable statutes and regulations. Upon approval, the credit union is officially chartered. The number five is a critical threshold for the initial formation of a credit union in North Carolina, reflecting a foundational principle of collective action and shared responsibility among the founding members. Understanding this minimum requirement is crucial for anyone involved in the establishment or governance of credit unions within the state.

North Carolina General Statute \(NCGS\) 54-1-101 outlines the fundamental principles for forming and operating cooperatives. This statute, along with other relevant cooperative laws in North Carolina, dictates the requirements for member participation and governance. When a cooperative seeks to amend its articles of incorporation, a critical procedural step involves obtaining member approval. The specific threshold for such approval is generally established within the cooperative’s bylaws, which are subordinate to the articles of incorporation and state law. However, the statute itself provides a baseline or a default mechanism if bylaws are silent or conflict. For amendments to articles of incorporation, a two-thirds majority vote of the members present and voting at a duly called meeting is a common and legally sound requirement in North Carolina, reflecting a commitment to substantial member consensus for fundamental changes. This ensures that significant alterations to the cooperative’s foundational documents have broad support among the membership, safeguarding against hasty or minority-driven changes that could undermine the cooperative’s purpose or the interests of its members. This requirement is rooted in the principle of democratic control inherent in cooperative structures.

In North Carolina, the Cooperative Marketing Act of 1931, as amended, governs the formation and operation of agricultural cooperatives. A key aspect of this act relates to the dissolution of a cooperative. When a cooperative decides to dissolve, it must follow a specific process to ensure that its affairs are properly wound up and its assets are distributed. This process typically involves a resolution by the board of directors, followed by a vote of the members. North Carolina General Statute §54-137 outlines the procedures for dissolution. It mandates that after the adoption of a dissolution resolution, the cooperative must cease its usual business operations, except as necessary for winding up. Creditors must be notified, and all debts and obligations must be paid or provided for. Any remaining assets are then distributed to the members in accordance with the cooperative’s articles of incorporation, bylaws, or, if not specified, in proportion to their patronage or contributions. The statute does not prescribe a fixed period for dissolution to be completed, but it must be done in an orderly manner, ensuring all legal and financial obligations are met before the cooperative ceases to exist as a legal entity. The dissolution process is primarily internal, guided by the cooperative’s governing documents and state law, with an emphasis on fairness to members and creditors.

The North Carolina General Statutes Chapter 54A, the Business Corporation Act, specifically addresses the formation and operation of corporations, including cooperatives. When a cooperative is formed, it must file Articles of Incorporation with the Secretary of State of North Carolina. These articles are the foundational legal document that establishes the cooperative’s existence and outlines its basic structure and purpose. While bylaws govern the internal operations and management of the cooperative, and membership agreements define the relationship between the cooperative and its members, the Articles of Incorporation are the initial, mandatory filing that brings the entity into legal existence under North Carolina law. Therefore, the primary legal instrument for establishing a cooperative’s existence in North Carolina is the Articles of Incorporation.

The North Carolina General Statutes Chapter 54A, the “North Carolina Business Corporation Act,” governs the formation, operation, and dissolution of business corporations. When a cooperative entity is structured as a corporation, these statutes apply. Specifically, regarding the termination of a cooperative’s existence, Article 14 of Chapter 54A outlines the procedures for dissolution. Voluntary dissolution can be initiated by the shareholders. The process typically involves a resolution adopted by the board of directors, followed by shareholder approval, often requiring a supermajority vote as specified in the articles of incorporation or bylaws. Once dissolution is authorized, the corporation ceases to carry on its business except as necessary for winding up its affairs. This winding up involves collecting assets, paying liabilities, and distributing any remaining assets to shareholders according to their respective rights and interests. The dissolution process is not instantaneous; it requires a formal, statutory procedure to ensure that all claims against the corporation are addressed and that remaining assets are distributed properly. This contrasts with a mere cessation of business activities without following the legal dissolution process.

The scenario describes a cooperative that has adopted bylaws that are more restrictive than North Carolina’s statutory requirements regarding the election of directors. Specifically, the bylaws require a higher quorum for director elections than what is mandated by North Carolina General Statute \(§ 54-24.1\). This statute outlines the minimum quorum requirements for member meetings of agricultural cooperatives, stating that a majority of members present in person or by proxy shall constitute a quorum for the election of directors. However, the statute also permits cooperatives to establish higher quorum requirements in their bylaws. Therefore, the cooperative’s bylaws, which require a higher quorum, are valid and supersede the statutory minimum in this instance. The cooperative’s action to hold the election with only a majority of members present, despite the bylaw’s higher requirement, would be invalid because it fails to meet the cooperative’s own established governance rules, which are legally permissible under North Carolina law as long as they are not less restrictive than the statute. The principle at play is that a cooperative’s bylaws, when properly adopted and not in conflict with mandatory statutory provisions, govern its internal operations, including meeting quorums.

The North Carolina General Statutes Chapter 54, Article 16, specifically addresses cooperative marketing associations. This article outlines the powers and limitations of such organizations. A key provision is the ability for a cooperative marketing association to enter into contracts with its members, including agreements that restrict the sale of products to entities other than the association. These contracts are often referred to as “marketing agreements” or “pooling agreements.” The statute provides that such agreements, when entered into by a member of a cooperative marketing association organized under these laws, are not illegal as a restraint of trade, provided they are made with the view of lessening competition or preventing a decline in prices, and are not designed to create a monopoly. This protection extends to contracts that obligate members to sell their produce exclusively through the association, thereby granting the association control over the marketing of a significant portion of the product. Therefore, an association formed under these statutes has the legal authority to enforce such exclusive marketing contracts against its members, as these are considered a legitimate means to achieve the association’s objectives.

The scenario presented involves a cooperative attempting to modify its articles of incorporation to change its business purpose from agricultural marketing to providing consulting services for agricultural businesses. In North Carolina, cooperative corporations are primarily governed by Chapter 54 of the General Statutes. Section 54-135 of the North Carolina General Statutes outlines the process for amending articles of incorporation. This section requires that amendments be adopted by a resolution approved by a majority of the directors and then submitted to the members for approval. The approval by members typically requires a two-thirds vote of the members present and voting at a meeting where a quorum is present, or by written assent of two-thirds of all members, as specified in the cooperative’s bylaws or as provided by statute if the bylaws are silent. The question tests the understanding of the required member approval threshold for such a significant change in corporate purpose. The statutory requirement for amending articles of incorporation, particularly regarding the business purpose, necessitates a high level of member consensus to ensure that fundamental changes reflect the will of the membership. Therefore, a two-thirds vote of the members present and voting, assuming a quorum is met, is the standard for approving such amendments under North Carolina law, as detailed in NCGS § 54-135 and general corporate law principles applicable to cooperatives.

The North Carolina General Statutes, specifically Chapter 54A, governs the formation and operation of credit unions. A credit union is a member-owned cooperative, democratically controlled by its members, and operated for the purpose of promoting the thrift of its members and creating a source of credit at reasonable rates. The fundamental principle of a credit union is mutual self-help. Unlike other business structures, credit unions do not issue stock. Instead, membership is typically established through a common bond, such as employment, geographic location, or association membership. This common bond requirement is a defining characteristic that distinguishes credit unions and is a key element in their chartering and regulatory oversight in North Carolina. The question probes the understanding of this unique ownership and operational structure, contrasting it with other forms of business organization that rely on share issuance or broad public investment. The concept of member ownership and control, rather than external shareholder investment, is central to cooperative principles.

The North Carolina General Statutes, specifically Chapter 54, governs cooperative associations. When a cooperative association amends its articles of incorporation, it must adhere to specific procedural requirements to ensure the amendment is legally valid and binding. The process typically involves a resolution by the board of directors and approval by the membership. For amendments affecting the rights of members or the fundamental structure of the cooperative, a supermajority vote of the membership is often required. North Carolina law, in G.S. 54-40, states that amendments to articles of incorporation require adoption by a resolution of the board of directors and then approval by a majority of the members present and voting at a meeting called for that purpose, provided a quorum is present. However, for significant changes, such as altering the voting rights of members or changing the nature of member contributions, the articles themselves may specify, or the statute may implicitly require, a higher threshold. In the absence of a specific statutory provision mandating a supermajority for all amendments, the default is typically a majority of members present and voting, assuming a quorum. Therefore, the critical step is the membership vote following board approval. The filing of the amended articles with the Secretary of State is the final ministerial act that makes the amendment effective.

In North Carolina, the concept of “patronage” is central to the definition and operation of agricultural cooperatives. Patronage refers to the business done by a cooperative with its members. For a business to be recognized as a cooperative under North Carolina law, a significant portion of its business must be conducted with its members on a patronage basis. Specifically, North Carolina General Statute \( \text{§} 54-155 \) outlines that at least 50 percent of the cooperative’s business must be with its members, and of that member business, at least 80 percent must be conducted on a patronage basis. Patronage business is typically defined as business that is based on the member’s use of the cooperative’s services or facilities, rather than on their capital investment. This distinction is crucial for maintaining the cooperative’s character and often has implications for tax treatment and legal status. The question tests the understanding of this specific statutory requirement regarding the proportion of business that must be conducted on a patronage basis with members to qualify as a cooperative under North Carolina law.

In North Carolina, the Business Corporation Act governs the formation and operation of corporations, including cooperatives. When a cooperative, structured as a business corporation, seeks to amend its articles of incorporation to change its principal place of business and to alter the stated purpose for which it was organized, it must follow specific procedures outlined in the North Carolina General Statutes. Specifically, Chapter 55 of the North Carolina General Statutes, which is the Business Corporation Act, details the requirements for amending articles of incorporation. Section 55-10-01 outlines that amendments must be adopted by the board of directors and then approved by the shareholders. For a cooperative, the membership often acts as the shareholder body. The process typically involves a resolution by the board of directors proposing the amendments, followed by a shareholder vote. The required vote for shareholder approval of amendments is generally a majority of the votes cast by shareholders entitled to vote on the amendment, unless the articles of incorporation or bylaws specify a higher threshold. The amended articles must then be filed with the North Carolina Secretary of State. The question hinges on the authority to initiate and approve such changes within the corporate structure. While the board of directors can propose amendments, the ultimate approval for fundamental changes like altering the corporate purpose and principal place of business typically rests with the membership, acting as shareholders. Therefore, a resolution by the board of directors, followed by approval from the cooperative’s members, is the correct procedural pathway.

The question probes the understanding of the legal framework governing cooperatives in North Carolina, specifically concerning the dissolution process and the distribution of residual assets. When a cooperative dissolves, North Carolina law, particularly Chapter 54 of the General Statutes, dictates how remaining assets are to be distributed. The primary principle is that any remaining assets after all debts and liabilities have been paid are to be distributed to members in proportion to their patronage or contributions. However, the cooperative’s articles of incorporation or bylaws can specify alternative distribution methods. If the articles or bylaws are silent on this matter, or if they provide for distribution to a non-profit entity, this must be followed. In the absence of any such provisions, the default is distribution to members based on patronage. The scenario describes a cooperative with no specific provisions in its articles or bylaws regarding asset distribution upon dissolution. Therefore, the residual assets are to be distributed to the members based on their respective patronage. Patronage is generally defined as the amount of business a member has done with the cooperative.

In North Carolina, when a cooperative seeks to dissolve voluntarily, specific statutory procedures must be followed to ensure a lawful and orderly winding up of affairs. The North Carolina Cooperative Corporations Act, specifically Article 17 concerning dissolution, outlines these steps. A cooperative can initiate voluntary dissolution if it has not commenced business or if it has ceased to conduct business and a majority of its members, or the holders of a majority of the voting power, vote for dissolution. The process involves adopting a resolution, filing articles of dissolution with the Secretary of State, and then proceeding with the winding up of the cooperative’s business. Winding up includes collecting assets, paying liabilities, and distributing remaining assets to members or other designated recipients according to the cooperative’s bylaws or the Act. The Act requires that notice of dissolution be provided to creditors and that all business cease except as necessary for winding up. The filing of articles of dissolution is a critical step that formally marks the beginning of the dissolution process with the state. The question focuses on the initial formal step required by the state to commence voluntary dissolution, which is the filing of the articles of dissolution. This filing is the official notification to the state that the cooperative has resolved to dissolve and is entering the winding-up phase.

The North Carolina General Statutes Chapter 54A, the Business Corporation Act, governs the formation and operation of corporations, including cooperatives. When a cooperative wishes to amend its articles of incorporation to change its principal office location within North Carolina, it must follow specific procedures. The statute requires that such an amendment be adopted by the board of directors and then approved by the members. For a cooperative, which is member-driven, member approval is a critical step. The process typically involves a resolution by the board of directors proposing the amendment, followed by a vote of the members at a meeting or by written consent. The statute does not mandate a specific percentage for board approval of such an amendment, but the articles of incorporation or bylaws might specify one. However, for amendments to articles of incorporation, the North Carolina General Statutes generally require approval by a majority of the votes cast by members entitled to vote thereon at a meeting of members, assuming a quorum is present. This ensures that the fundamental governing documents of the cooperative reflect the will of its membership. The filing of the amendment with the Secretary of State of North Carolina is the final step to make the change legally effective.

The scenario describes a situation where a cooperative, established under North Carolina law, has a bylaws provision that conflicts with a statutory requirement. Specifically, the bylaws stipulate a higher threshold for member approval of certain actions than what is mandated by North Carolina General Statute §54-14. This statute, concerning the powers and procedures of agricultural cooperatives, outlines that amendments to articles of incorporation generally require a two-thirds vote of members present and voting at a meeting where a quorum is met, unless otherwise specified in the articles or bylaws. However, when a bylaw provision directly contradicts a clear statutory mandate, the statute generally prevails. The cooperative’s bylaws are subordinate to state law. Therefore, the bylaws’ requirement for a three-fourths vote, when the statute permits a two-thirds vote for the same action, would be deemed invalid to the extent of the conflict. The cooperative must adhere to the statutory minimum of two-thirds. This principle reflects the supremacy of state law over internal organizational rules when there is a direct conflict on a matter regulated by statute. The cooperative’s governing documents cannot override a clear legislative directive.

The scenario describes a cooperative seeking to amend its articles of incorporation. In North Carolina, cooperative corporations are primarily governed by Chapter 54 of the North Carolina General Statutes. Specifically, amendments to articles of incorporation are addressed by G.S. 54-38, which outlines the procedure for such changes. This statute generally requires a resolution adopted by the board of directors and then submission to the membership for approval by a vote of at least two-thirds of the members present and voting at a meeting where a quorum is present. The question asks about the appropriate method for amending the articles of incorporation, which is a fundamental governance matter for cooperatives. The cooperative must follow the statutory procedures to ensure the amendment is legally valid and binding. This involves a formal process of board and member approval, reflecting the democratic principles inherent in cooperative governance. Other methods, such as unilateral board action without member approval or simple majority vote, would not satisfy the statutory requirements for amending foundational corporate documents. The principle of member control is paramount in cooperative law, necessitating a supermajority vote for significant changes like amending articles of incorporation.

In North Carolina, the North Carolina Farm Cultivator Act, Chapter 116, Article 20 of the General Statutes, governs the formation and operation of agricultural cooperatives. A critical aspect of cooperative law in North Carolina pertains to the distribution of patronage dividends. Patronage dividends are payments made by a cooperative to its members based on their use of the cooperative’s services. Under North Carolina law, specifically NCGS § 116-209.13, patronage dividends distributed to members from income derived from non-patronage sources, such as investments or sales of assets unrelated to the cooperative’s primary business purpose, are generally taxable to the cooperative. Conversely, patronage dividends distributed from income derived from patronage sources, meaning income generated from the business dealings of the cooperative with its members, are typically not taxed at the cooperative level if they are properly distributed to members in accordance with the cooperative’s bylaws and state law. The key distinction for tax purposes at the cooperative level lies in the source of the income from which the dividends are paid. Income from patronage is generally flowed through to members, while income from non-patronage sources, when distributed as dividends, can be subject to corporate taxation. Therefore, if a North Carolina agricultural cooperative distributes patronage dividends that are funded by profits from selling surplus equipment not used in its primary agricultural operations, this income is considered non-patronage income. The distribution of these dividends, even if labeled as patronage dividends, will be taxed at the cooperative level because the underlying income was not generated from member patronage.

The scenario involves a cooperative association in North Carolina that has engaged in transactions with non-member entities. North Carolina General Statute \(§ 54-169\) outlines the limitations on a cooperative’s business activities with non-members. Specifically, it states that a cooperative may not conduct business with non-members to an extent that would jeopardize its cooperative character or violate specific statutory provisions. While cooperatives are permitted to conduct some business with non-members, the primary intent and volume of business should remain with its members. The statute does not provide a precise percentage, but rather a qualitative assessment of whether the non-member business fundamentally alters the cooperative’s nature. Therefore, the cooperative’s ability to conduct business with non-members is not strictly defined by a numerical threshold but by its potential impact on its cooperative identity and adherence to the cooperative principles as enshrined in North Carolina law. The focus is on maintaining the cooperative’s primary purpose of serving its members.

The North Carolina General Statutes Chapter 54A, Section 54A-17, outlines the powers of credit unions, including the authority to establish and operate service centers. A service center, as defined in cooperative law, is essentially a branch or facility that provides services to members. The statute grants credit unions the power to establish, maintain, and operate service centers at any location within or without North Carolina, provided such operations are approved by the Credit Union Administrator. This approval process ensures that the expansion or establishment of service centers aligns with the safety and soundness of the credit union and serves the interests of its members. The key element here is the statutory grant of authority and the administrative oversight required for such operations, distinguishing it from mere internal administrative offices which might not require external approval for their existence or function. The question probes the understanding of the legal basis for a credit union’s physical presence beyond its primary headquarters.