Saturday, 5 March 2022

What are cooperative societies and their features, advantage, and disadvantage?

 A cooperative society is a form of business where people are associated voluntarily and work together for the benefit of the member. In this kind of business, multiple investors and peoples work together voluntarily in order for the benefit of all the members. People come together in need to protect their economic interests. The basic aim is to give support to members. Primarily this business type supports all its members, and the earned profit is divided among all the members. Members of cooperative society want to protect themselves from the exploitation of the middle man and earn a great amount of profit.

The cooperative society must have to register under the cooperative society act. The process of establishment is very simple and the most important requirement consent of ten adult people from society. After registration, every member gets individual voting right and get many benefits as well.


The features will help in a better understanding of cooperative society. These are the following characteristics of the cooperative society Here we are listing some points.

  • Voluntary membership: people are free to join the cooperative society, and they can also leave any time according to their desire. This corporate business community allows all the business member to join the community any time, invest thier money and efforts and make money. Also, they are free for leaving the community any time. A member needs to serve notice to cooperative society before leaving. The cooperative society memberships open the door for all cast, every religion, and gender.
  • Legal status: registration is mandatory for a cooperative society. It is required for this corporate community to be registered. This will allow becoming a distinct identity from its members. 
  • Limited liability: since multiple members invest in this community, the members liability is limited to the extent of investment of the amount in a cooperative society. 
  • Control: in a cooperative society business the power of making decisions depends on the hands of the elected person of the committee. The members have voting right; they give the vote for selecting a leader of a cooperative society. 
  • Service motive: the purpose of a cooperative society is to emphasize the value of one another help and welfare. The surplus of a cooperative society is divided among the members according to the law f society. 

Benefits of cooperative society    

The cooperative society provides immense benefits to its members. These benefits motivate them to work hard. Here I am listing some benefits of a cooperative society. 

  • Giving voting rights: the major benefit is offering equal voting right irrespective of the amount of invested capital. 
  • Limited liability: the risk of liability is less because the liability is directly connected to the amount of capital they invest in the business. The individual personal assets are self from being the use of repaying of business debts. 
  • Stable existence: the individual death bankruptcy or insanity will not affect the persistency of cooperative business. According to the law cooperative society business is distinct from members. 
  • Economic operation: a cooperative society aims to offer immersion services to society at a low cost. The focus of cooperative society is eliminating middlemen costs, it will help in reduction in cost. 
  • The benefit of tax: there are several benefits offered by the government regarding tax. The government also gives support like giving loans in low interest. 
  • Ease of formation: the cooperative society can start with ten members and the registration process is not complex. 

Limitation of the cooperative society 

Every business offers not only many benefits, but also suffers forms disadvantages as well. Here we will discuss some limitations of a cooperative society. 

  • Limited resources: resources are directly linked with the contribution of investment of members. The dividend of a cooperative society is comparatively less from other businesses, this situation cooperative society attracts limited members and deterrents the more capital from the members.
  • Lack of management: as we all know the leader is elected from the members of a cooperative society. In this case, it is not necessary for every member having efficient expertise for management. Another reason is cooperative society is not able to pay high salaries to expertise managers because they have limited resources regarding funds. 
  • Lack of secrecy: the cooperative society has a minimum of ten people, as result, they need to open discloser in meetings of members. In this, it is very difficult to maintain privacy regarding business.
  • Government control: the government offers several privileges to cooperative society like less rate interest, low tax rates, and many more. In against these privileges, the government has imposed several rules on cooperative society like regulation regarding the auditing of accounts, submission of accounts, etc. The government is interrupting the function of the organization. 
  • Conflict in opinion: in a cooperative society business a minimum number of people is ten and the maximum number is not defined. In this situation every person has a different opinion; it will create conflict in opinion and difficulty in decision making. Personal interest might start the dominate the welfare motive and the interest of another person may take the back seat.                

The bottom line

So, this is all about the cooperative society, their features, thier benefits, and drawbacks. I hope this guide help you gain valuable information related to the cooperative society.

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