Merits and demerits of co-operative society

MERITS AND DEMERITS OF CO-OPERATIVE SOCIETY

MERITS

1)Easy formation

  The formation of co-operative society is easy. The minimum 10 members are required to form the co-operative society. The registration of a co-operative is compulsory but the procedure for registrations is simple and the fees are also nominal.

2)Democratic management

  The management of co-operative organization is based on Democratic principle and it is managed by 'managing committee', which is elected body of represented. The principle of voting is'one member, one vote.' Again each member is given an opportunity to express his opinion.

3)open membership

The membership of co-operative society is voluntary and it is open to all I.e. any person of any caste, creed, religion, etc. Can become a member by purchasing shares in the society. There is no force or compulsion on any person to join or leave the organization. 

4)stability

 Since co-operative organization enjoys an independent legal status different from its members it enjoys a stable and continuous life I.e.  its continuity does not get affected by the death, insolvency and insanity of any members.

5)limited liability

Liability of member in a co-operative organization is limited to extent of the unpaid amount of shares held by him I.e. if the business assets are not e to pay off its debts the personal property of members cannot be utilized for the purpose.

6)Tax concession

Since co-operative societies play an important role in the economic and social department of the country, the government gives many concession to them which include exemption of payment of income tax up to a certain limit. This helps in increased profitability.

7)Low cost of operation

  The cost of operation of a co-operative society is low due to the following reasons:-

A) no salaries are to paid to office bearers because they provide honorary services.

B)no advertisement expenses because members are customers.

C) no middle men are involved. 

D) no showroom or sophisticated offices are required for selling its products etc.

8)self financing charity

 After  paying maximum divided of 15% p.a. and also giving bonus on the purchases made by members , the surplus profit is utilized for growth and development of organization and also for charitable and social activities.

DEMERITS

1)limited capital

As the members of co-operative organization belong to lower and middle income group and maximum dividend of 15%p.a. is paid on the shares, the members does not get attracted towards the organization for investing the money. Again, 'one member, one vote' is the principal followed which is not liked by the people interested to purchase monitory shares. Thus, co-operative organization cannot attract a very large amount of capital. 

2)Incompetent management

 Managing committee members may not possess the required skills, abilities, time and experience for managing the  affairs efficiency. Again due to limited funds the services of secrecy in the co-operative organization which adversely affected the success of organization.

3) Lack of business secrecy 

 A wide publicity is given to the activities and operation of co-operative society be way of  making available accounts to members, auditors and considers inspection. Again ,various statements need to sent to the government from time to time. Thus, there is lack of secrecy in co-operative organization which adversely affects the success of organization. 

4)conflicts among members

 There is constant conflict among members as they lack the maturity and experience in the handing the affairs of the societies. Some members makes personal gain out of society's funds. These matters result in disputes and may also result in winding up  of the co-operative society.

5)Government control

Registration of the co-operative society is compulsory. Various statements are required to sent to the government from time to time. Further ,there is strict control and supervision by the state government  on working of co-operative organization. Thus, due to excessive government control, the spirit of co-operative is lost.

6)Absence of motivation

  As the managing committee members work on an honorary basis there is no incentive for them to work hard. This may result in lack of interest by the management.

7)political interference

 These days many co-operatives are formed to serve the interest of political parties. These political people use the funds of the society for their political party. Thus, more interference of politics running the organization is completely destroyed.

8)limited scope for expansion

Due to limited financial and managerial resources a co-operative society cannot cannot expand business beyond certain limit.