Mutual Company

mutual-companyMutual company is a business owned by the users of the service it provides. Mutual companies include many insurance companies, banks, savings and loan associations, cooperatives, and credit unions. In the United States, the government gives mutual companies special tax treatment because they do not seek profit in the usual sense. Instead, they pass on any profits to their members in the form of lower costs or insurance premiums, or higher interest paid on savings deposits. Sometimes, mutual insurance companies also pay money known as a dividend as a payout for yearly profits.

In the 1980’s and 1990’s, many mutual companies changed their business organization to become privately owned corporations. Usually, this meant that the mutual company sold shares in the business to investors, and the investors became the owners of the company. This process is called demutualization. It was especially common with insurance companies and savings and loan associations in the 1980’s.