11 Crucial Pros and Cons of Co-Operative Societies

Co-operatives are a form of a business that is owned by its members and it is run by the members. The members share the profits of the business.

They have a separate legal entity and it has democratic management. There are various types of co-operatives. We have the retail co-operatives, worker co-operatives, housing co-operatives, service cooperatives, and producer cooperatives.

Examples of co-operatives include agricultural co-operatives, credit union co-operatives, and housing co-operatives.

Pros and Cons of Co-Operative Societies

Pros of Co-Operatives

  1. Their operation is democratic

One member does not dominate decision making, each and every member has to give his or her opinion. This attracts the clients who may want to become members. In addition to that its structure is stable in that the coming of members and going away do not affect the running of the business.

  1. Less taxation

Members are taxed once on their income from the cooperative itself instead of being taxed individually. Cooperatives are normally given special treatment when it comes to taxation hence its members benefit from it.

  1. Cooperation

Cooperatives emphasize on social and psychological development brought about by the worker-control parameters in the cooperatives. The parameters help to transform the relationships in the cooperatives hence cooperation.

  1. Economic benefits to its members

Depending on the type of cooperative, members benefit from the cooperatives. For instance, consumer cooperatives, members are entitled to patronage dividends. Members who work within the cooperatives are qualified to get merchandise discounts.

  1. Less liability

Members in a cooperative have an equal distribution of liability. Each owner of the cooperative has only limited liability for the company’s debts.

  1. Business grants

Cooperatives are eligible to receive business grants from the government and other financial institutions.

Read More: Pros and Cons of Sole Proprietorship 

Cons of Cooperatives

  1. Legal restrictions

Every state has cooperative laws that are very different.  Some states have laws that are very strict only allowing cooperatives on certain industries to operate within the state. This may result in not allowing other cooperatives to operate in some areas.

  1. Slow decision-making process

As the cooperatives are democratic may lead to slow in decision making. In situations where decisions have to be made faster, cooperatives may not work as all members have to their opinion before a decision is arrived at.

  1. Only appealing to small investors

Cooperatives may not receive loans from banks that is why may work only for business with lower startup cost which will scare away big investors.

  1. Members may lose control of their unique brand

When marketing through a cooperative, members may lose control of their unique brand. This is because the cooperative may decide to do marketing for the members which may result in them giving different information to customers.

  1. Same pricing with the competitors

Purchasing commodities through cooperatives, you may end up sharing the same price with the competitors. This will mean that the members cannot have control over their products whether small or big.

Read More: Pros and Cons of Partnership

Summary

As many people prefer cooperatives because of the good things they offer, many also do not like them because of the disadvantages that come with them.

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