Cooperative form of organisation offers the following advantages:
1. Ease of formation:
It is quite easy to form a cooperative society. Any ten adults can join together and form themselves into a cooperative. Very little time and money are required to get a cooperative registered. The legal formalities are very few and simple.
2. Open membership:
Any person having a common interest can become members of a cooperative society and can leave the society at his own pleasure. No discrimination is made on the basis of caste, creed, religion or political affiliation. The cost of a share is low and even poor persons can buy it.
3. Limited liability:
The liability of every member is limited to the extent of his share in the society’s capital. Therefore, the risk faced by every member is limited and known.
4. Continuity and stability:
After registration, a cooperative society becomes a separate legal entity. The death, lunacy, or insolvency of a member does not affect its existence. Therefore, it enjoys continuity of operations.
5. Democratic management:
Management of a cooperative society is fully democratic. Every member has an equal vote or voice irrespective of his capital contribution. The principle of ‘one man one vote’ is followed. A small group of members cannot dominate the control of the society.
6. Internal financing:
A large part of the profit of a cooperative society is transferred to general reserve every year. Dividend on capital cannot exceed ten per cent. Therefore, plouging back of profits facilitates the expansion and growth of the society.
7. Low operating costs:
The office bearers of a cooperative society offer honorary service. Therefore, cost of management is low. Cash trading avoids bad debts and there is no need to maintain huge stocks.
As customers are primarily the members themselves there is saving in advertising and selling expenses. Elimination of middlemen also adds to economy of operations.
8. Cheaper and better supplies:
Cooperative societies supply better quality goods at cheaper rates. Due to service motive, the focus is on the welfare of members. Surplus is also shared by the members on equitable basis.
9. State patronage:
The Government provides several concessions to cooperative societies in the matter of taxes, finance, etc. A cooperative society enjoys special privileges and exemptions.
10. Social utility:
Cooperatives are non-competitive organisations. They promote personal liberty, social justice and mutual cooperation. They help to prevent concentration of economic power in a few hands.
Cooperative undertakings also serve as a training ground for self-government. They foster fellow feeling, self help, thrift and moral values among the members.