Mutualization

DEFINITION of 'Mutualization'

The process of changing a firm's business structure so the owners of the company are eligible to receive cash distributions from the company in direct proportion to the amount of revenue the company earns from each member. This form of business structure is also known as a cooperative in some jurisdictions.

BREAKING DOWN 'Mutualization'

The mutual business structure can be very beneficial to a member, as each member will receive a dividend for doing business with the company, but this distribution may be a tax-free distribution depending on the laws of the jurisdiction in which the member lives. An examples of a mutualized company is a grocery chain in which each shopper can become a member and receive money each year for shopping at that grocery chain.

RELATED TERMS
  1. Mutual Company

    A private company whose ownership base is made of its clients ...
  2. Jurisdiction Risk

    The risk that arises when operating in a foreign jurisdiction. ...
  3. Overlapping Debt

    The financial obligations of one political jurisdiction that ...
  4. Patronage Dividend

    A dividend or distribution that a co-operative pays to its members ...
  5. Mutual Insurance Company

    An insurance company that is owned by policyholders. The sole ...
  6. Organizational Structure

    Explicit and implicit institutional rules and policies designed ...
Related Articles
  1. Investing

    Capital Structure

    Capital structure is the combination of the debt and equity a company uses to finance its long-term operations and growth.
  2. Entrepreneurship & Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  3. Managing Wealth

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  4. Entrepreneurship & Small Business

    5 Reasons Small Business Owners Sell Their Companies

    Selling a business you've built from scratch isn't done lightly. Consider these moments when the opportunity might be right for you.
  5. Financial Advisor

    Preparing Finances For Deployment: A Guide For Service Members

    Those who follow the instruction in this article can look forward to a homecoming of financial prosperity.
  6. Financial Advisor

    Structured Notes: What You Need to Know

    Structured notes are complex, high risk and might not be suitable for individual investors. Here's why.
  7. Financial Advisor

    4 Structured Product Types Wealthy Clients Love

    High-net-worth investors find structured products appealing for a variety of reasons. Here's a look at four types.
  8. Managing Wealth

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  9. Managing Wealth

    The 4 Most Common Reasons a Small Business Fails

    Discover the most common reasons small businesses fail, including capital formation, management concerns, planning issues and marketing missteps.
  10. Personal Finance

    Top 7 Money Saving Tips For Buying Groceries

    Understand why it benefits grocery shoppers to shop intelligently with money-saving tips, such as staying away from prepared foods and looking for coupons.
RELATED FAQS
  1. Do companies have to pay back their paid-up capital?

    Learn what business structures are available to entrepreneurs, and learn the process for making the most appropriate selection ... Read Answer >>
  2. John King, a CFA, resides in Jurisdiction A, where the securities laws and regulations ...

    The correct answer is d. Since the Law of Locality applies, and King performs his business in Jurisdiction B (where securities ... Read Answer >>
  3. Do mutual fund companies pay taxes?

    Learn how mutual funds are incorporated as regulated investment companies and are exempt from paying taxes under certain ... Read Answer >>
  4. What are the major types of business in the private-sector and how do they differ ...

    Learn more about how private companies are organized and how large and small companies differ from one another in organization ... Read Answer >>
  5. Can a Limited Liability Company (LLC) issue stock?

    Learn about a limited liability company, or LLC, and if it is able to issue stock. Understand the benefits of an LLC, both ... Read Answer >>
  6. How do dividends affect net asset value (NAV) in mutual funds?

    Understand how dividends affect the net asset value of mutual fund shares, and how this fits into the calculation of a mutual ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center