What are the Advantages and Limitations of Cooperative Societies?

Advantages

The following are the advantages of the Co-operative Society:

1. Ease of formation:

Since it is a voluntary organisation it is easy to form by any ten members. Its registration is also easy.

2. Unlimited membership:

There is no restriction with respect of maximum number of members.

3. Democratic management:

It is a democracy of men with each member being entitled to only one vote irrespective of the number of shares held by him.

4. Limited liability:

The liability of the members of a society is limited to the nominal value of shares held by him.

5. Continuous existence:

The society will not be affected by the death or insolvency of a member. It will have continuous existence.

6. Economic operations:

Since middlemen are avoided, a co­operative society will have economy in their operations. They need not pile up huge stocks and thereby block capital.

7. Cheaper service:

It offers better service at cheaper costs.

8. Tax concessions:

Co-operative societies enjoy the benefit of certain preferences being shown towards them by tax authorities.

9. Social benefit:

It helps in social welfare as it caters to the needs of the poor and middle sections of the society. It promotes saving habit, self-help and other moral values in the society.

Disadvantages

It however suffers from the following limitations.

1. Limited resources:

Societies cannot raise huge amounts as capital because the members may not be able to invest more.

2. Limited scope:

As the resources are limited the chance of expansion is limited.

3. Inefficient management:

It is usually managed by members and the members may lack experience and managerial capacity.

4. No secrecy:

Secrets cannot be maintained by business.

5. Lack of co-operation:

Sometimes the members may not have unity among themselves which might affect the business of co-operatives.

6. No credit facility:

Since credit facilities are not offered to members usually, the members may not be interested in buying goods for cash.

7. Political interference:

Interference by political parties may come in the way of proper functioning of co-operative societies.