A cooperative society is different from other forms of business organization because other business organizations like partnership firm or private limited companies work with the sole objective of earning profits whereas in this form of business organization member’s voluntary join the society so to work for the benefit of the members of the society while doing business. In order to understand more about this concept, one should look at the advantages and disadvantages of cooperative society –
Advantages of Cooperative Society
Limited Liability
The first and foremost advantage of a cooperative society is that the liability of the members of the society is limited to the amount of capital invested by the members and hence any loss arising due to the business done by the society will be limited to the amount of capital invested by the members in the cooperative society.
Equal Rights to Members
Another benefit of a cooperative society is that all members have equal rights irrespective of the amount of capital invested by the members. Hence for example, if one member has put $100000 and another member has brought $1000 than the member who has brought more capital does not get more voting rights or other rights rather he or she will get rights equal to the member who has brought $1000. In simple words, there is no discrimination among members of the society due to the capital brought by them into the society fund.
Stable and Economic
In case of sole proprietorship business comes to end with death of sole proprietor or in case of partnership business comes to end with death of partners but in case of cooperative societies this is not the case as with death or bankruptcy of the members of the society does not result in winding up of cooperative society rather it operates continuously thus any change in membership does not affect the operations of the cooperative societies. Besides members join the societies voluntary which helps the society in saving a lot of costs associated with employees hence in a way cooperative societies are economical to operate as compared to other forms of business organizations where employee’s costs and other operating costs are on the higher side.
Disadvantages of Cooperative Society
Unprofessional Management
The biggest disadvantage of cooperative society is that majority of societies are run by people who do not have expertise in managing the business and since these societies cannot pay remuneration incommensurate with private limited companies it fails to attract talented individuals to the society resulting in below average people managing the societies which in turn will result in society working inefficiently and ineffectively.
Limited Capital
Since members bring capital voluntary which in turn results in cooperative society having limited capital and due to limited capital these societies cannot take too much risk and we all know that without taking the risk no business can earn a return. In simple words, due to lack of capital or resources, these societies lag behind other forms of business organizations like a partnership and private limited companies.
Lack of Unanimous Opinion
Since members have equal rights all members put forward their opinions and views which results in decisions getting delayed due to constant quarrel among the members as not all members can agree on the same thing at the same time. In simple words, due to lack of single decision-making authority all important decisions of the society gets delayed which in turn results in loss of competitive edge of the cooperative society.
As one can see from the above that cooperative societies have advantages as well as disadvantages and that is the reason why before forming an opinion on this form of business organization you should carefully read above points and then take the decision accordingly.