What are the main advantages of co-operative form of Business?

Advantages of Co-operatives:

The following are the main advantages of co-operatives:

1. Easy formation:

The formation of cooperative society is very simple as compared to the formation of other form of business organization. Any two adults can come together and join their hand and form a cooperative society.

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The procedure of registration of the society is also very simple and easy. No legal formalities are required for the formation of cooperative society.

2. Democratic management:


The management or co-operative is rest on the elected members from among themselves by forming a committee. Every member gas equal say in making policies of the society. “The one man, one vote” principle ensures a democratic management.

3. Open membership:

The membership of co-operative societies is open to each and every person. Anybody wishing to enjoy the fruits of a co-operative can join it. Nobody is barred from joining societies on the basis of economic position, caste, color or creed.

A person can enrolled as a member any time he/she likes by contributing the minimum capital. He/she can also withdraw the membership when ever he does not like to continue as a member.

4. Service motto:

The cooperative societies are formed not for profits but for providing service. The societies try to promote the interests of the members. A feeling of co-operation is created among members.

5. Economical Operation:


The operation carried out by the cooperative society is economical due to the elimination of middlemen. The societies purchase goods directly from producers and sell them to the members at cheap at rates. The services of the middlemen are provided by the members at cheaper rate.

6. Low management costs:

The management of a co-operative society is in the hands of persons elected by the shareholders. Members take active interests in the working of the society. Thus, the recurring and non-recurring costs are low.

7. Sharing of surplus:

The societies sell goods to its members on a nominal profit to cover up administrative costs. The surplus earned by the society is spent on the basis of cooperative Act.

After meeting the expenses, some portion of the surplus spent for welfare of the members, some portion kept as reserve and balance is distributed among the members.

8. Check on business:


The co-operative are stared with service motive while all other forms of business are launched with a profit motive. When businessmen try to exploit consumers by increasing prices of their goods, co-operatives supply commodities at reasonable prices.

The co-operatives provide a check on the business of the other forms of enterprises. Other traders will have to reduce their prices when co-operatives are supplying these goods at lower prices. Consumers are not at the mercy of selfish businessmen.

9. Limited liability:

The liability of individual members is limited to the extent of shares purchased capital contributed by him. Thus members can enjoy the benefits of limited liability.

This makes them free from the tear of utilization of their private property, in case of financial crunch to the society.

10. Internal financing:

It provides ample scope for internal financing by utilizing the balance of the surplus earned in any year for its growth, development and expansion; because the law governing co-operatives lays down that the dividend on a share in any co-operatives shall not exceed 67% p.a.

11. Continuous existence:

It enjoys the benefit of continuous existence, because its life is not affected by the death, insolvency, lunacy, permanent incapacity or conviction of a member.

Therefore, it has stable life and continues to exist for a long period of time.

12. Satisfy the needs of poor persons:

The co-operative organizations are best suited to meet the needs of the poorer sections of the India society. These solve their economic problems and improve their economic conditions.

13. Perfect co-ordination:

Service before self (which is the guiding spirit of co-operation) as the foundation of a co-operative organization makes them the best possible service organizations for promoting public interest and welfare.

Since the members of a co-operative organization belong to a local area or a particular class or group who are entrusted by the ideals of co-operation, its management actually benefits from a perfect coordination among the members of the Managing Committee.

14. Desirable form of business:

The co-operative organization is desirable forms of business even from the social stand point particularly because it lays more emphasis on the moral character and the development of personal qualities.

It fosters a fellow feeling among its members and imparts those moral and educative values to their everyday life which are essential for a better living.

15. Reduction of glaring disparity in the National Income:

Above all, the benefits and profits of a co-operative organization are enjoyed by those people who actually deserve such gains thereby reducing to some extent the glaring disparity.

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