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 skim it quickly to know about all of them.
Having a brief knowledge about a 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 at 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. A cooperative business is owned by members of organization and profit and loss are 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 a 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 suggests, cooperation is the biggest advantage of cooperative business. A workplace where members put their effort both at an 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 a corporation, individual tax isn’t a problem here and members and owner can relax as cooperatives have to pay tax on the whole business
- All members are considered to be equal when it comes to decision making regardless of their more or fewer shares
- Limited interest on share capital
- Members can make decisions that are beneficial for the business and this motivates 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 a 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 maintained regularly
- The manager of a 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 lose interest in the organization, all the burden of progress will be on the 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.
Humanizing the Economy: Cooperatives in the Age of Capital
We hope you are familiar with the famous book Humanizing the economy: cooperatives in the age of capital. But if you are not, we highly recommend you to read this masterpiece by John Restakis. It describes how corporate co-operative has extended all over the world. While the negators of this ideology believe that globalization of this system is failing to meet the need of even the basic needs of billions of people. Buy this book now at an affordable price of just $20 from Amazon. You can also find a free PDF version online so if you are interested in cooperative business, just go for it.
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