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Advantages and Disadvantages of Co-operative Society

Advantages and Disadvantages of Co-operative Society

Advantages of Co-operative Society

A Co-operative form of business organisation has the following advantages:

Ø  Easy Formation: Formation of a co-operative society is very easy compared to a joint stock company. Any ten adults can voluntarily form an association and get it registered with the Registrar of Co-operative Societies.

Ø  Open Membership: Persons having common interest can form a co-operative society. Any competent person can become a member at any time he/she likes and can leave the society at will.

Ø  Democratic Control: A co-operative society is controlled in a democratic manner. The members cast their vote to elect their representatives to form a committee that looks after the day-to-day administration. This committee is accountable to all the members of the society.

Ø  Limited Liability: The liability of members of a co-operative society is limited to the extent of capital contributed by them. Unlike sole proprietors and partners the personal properties of members of the co-operative societies are free from any kind of risk because of business liabilities.

Ø  Elimination of Middlemen’s Profit: Through co-operatives the members or consumers control their own supplies and thus, middlemen’s profit is eliminated.

Ø  State Assistance: Both Central and State governments provide all kinds of help to the societies. Such help may be provided in the form of capital contribution, loans at low rates of interest, exemption in tax, subsidies in repayment of loans, etc.

Ø  Stable Life: A co-operative society has a fairly stable life and it continues to exist for a long period of time. Its existence is not affected by the death, insolvency, lunacy or resignation of any of its members.

Limitations of Co–operative Society

Besides the above advantages, the co-operative form of business organisation also suffers from various limitations. Let us learn these limitations.

Ø  Limited Capital: The amount of capital that a cooperative society can raise from its member is very limited because the membership is generally confined to a particular section of the society. Again due to low rate of return the members do not invest more capital. Government’s assistance is often inadequate for most of the co-operative societies.

Ø  Problems in Management: Generally it is seen that co-operative societies do not function efficiently due to lack of managerial talent. The members or their elected representatives are not experienced enough to manage the society. Again, because of limited capital they are not able to get the benefits of professional management.

Ø  Lack of Motivation: Every co-operative society is formed to render service to its members rather than to earn profit. This does not provide enough motivation to the members to put in their best effort and manage the society efficiently.

Ø  Lack of Co-operation: The co-operative societies are formed with the idea of mutual co-operation. But it is often seen that there is a lot of friction between the members because of personality differences, ego clash, etc. The selfish attitude of members may sometimes bring an end to the society.

Ø  Dependence on Government: The inadequacy of capital and various other limitations make cooperative societies dependant on the government for support and patronage in terms of grants, loans subsidies, etc. Due to this, the government sometimes directly interferes in the management of the society and also audits their annual accounts.

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