14 advantages and disadvantages of cooperative business are very important to understand if you are looking to start one. There are some other types of business and we suggest you to skim it quickly to know about all of them.
Having a brief knowledge about cooperative business will be handy before getting into the pros and cons discussion. If you have already gone through our type of business ownership writings, you are good to skip the next section. If not, have a quick look on the next section.
Keeping the advantages and disadvantages of cooperative business aside, let’s talk about what is cooperative business. Cooperative is a form of business ownership in which the profit is shared among the members of business only and not the stakeholders from outside. Cooperative business is owned by members of organization and profit and loss is all on them.
It’s compulsory for your business or organization to have a board of directors and membership application criteria. If you are thinking of starting an online business, don’t go for cooperative form of business ownership as it’s the least common. Cooperatives can be of either incorporated or unincorporated types.
The three famous types of cooperatives are producer cooperatives, worker cooperatives and consumer cooperatives.
Advantages and disadvantages of Cooperative Business
The advantages and disadvantages of cooperative business are as follows so don’t miss out any of them:
- As the name suggest, cooperation is the biggest advantage of cooperative business. A workplace where members put their effort both at individual and collective level
- As members can take part as well, so collectively, it becomes a low cost business type or we can say that financing becomes easier
- Unlike corporation, individual tax isn’t a problem here and members and owner can relax as cooperatives have to pay tax on whole business
- All members are considered to be equal when it comes to decision making regardless of their more or less shares
- Limited interest on share capital
- Members can make decisions that are beneficial for the business and this motivate them to work best also if they have some stake in the business. Eventually, it will glorify your cooperative business
- Members get the patronage dividends according to the amount spent by them on a certain product
- The democratic nature in the structure of cooperative business helps to grow it successfully as decision-making is done not only by the owner but also on behalf of any member who proves his decision can be worthy. Also, if a client is worthy, he/she can also join as member
- Big investors don’t get much attracted as it’s only a good platform for investors with small contributions
- Record keeping needs to be massive as data or records needs to be maintain regularly
- The manager of co-op is the key to success just like a good competitive manager which quickly reports to the manager and is concerned with the business
- If few of the members loses interest in the organization, all the burden of progress will be on rest of the members
- If additional funding is required by the cooperative organization, it will be very hard
- As we have discussed in the advantages that collective decision making is helpful but it is a disadvantage at the same time as collective decision making can be time-taking
These were the pros and cons of cooperative business and we hope you like this piece of sharing. Comment us below and do tell us about how much you like this article? Share your business experience with your fellows.