Types of Company-Cooperative Societies Easy Notes-22



Business Organisation

Types of Company-Cooperative Societies Easy Notes-22

Types of Company-Cooperative Societies


The Cooperative moment has been the outcome of the economic and social imbalances caused by the Industrial Revolution, Cooperative Societies have acquired significance in both capitalist countries as the US and Japan, as well as in socialist countries.


A cooperative society is a special type of business organization different from other forms of business organization you have learned about earlier. Let us discuss its characteristics.

1. Voluntary Association

A Cooperative Society is a voluntary association of persons. A member can join the society as and when he likes, continue for as long as he likes, and leave the society at will.

2. Open Membership

Membership in a Co-operative Society is open to all those who have a common interest. Membership is not restricted on the basis of caste, sex, color, or religion, but may be limited to the employees of a particular organization.

3. Separate Legal Entity

A cooperative undertaking must seek registration under the Cooperative Societies Act, of 1912, or under the relevant Cooperative Societies Act of the State Government. A cooperative society has a separate legal existence, distinct from its members.

4. Source of Finance

The capital of a cooperative society is raised among its members in the form of share capital. However, it can easily raise loans and secure grants from the government after its registration.

5. Service Motive

The primary aim of a cooperative society is service to its members, though it may also in the process happen to earn reasonable profits for itself.

6. Voting Power

Each member has only one vote, irrespective of the number of shares held by him or her.


Cooperative societies may be classified on the basis of the nature of services rendered by them. The following are the main types of cooperative societies.


1. Consumer’s Co-operative Societies

These societies are formed to protect the interest of general consumers by making consumer goods available at a reasonable price. They purchase goods directly from the producers, this eliminates the middlemen in the process of distribution. Kendriya Bhandar, Apana Bazar, and Super Bazar are examples of consumers’ cooperative societies.

2. Producers Co-operative Societies

These societies are formed to protect the interest of producers who are basically small in size, by making available items of their needs for production like raw materials, tools and equipment, machinery, etc. Handloom societies like APPCO, Bayanika, Haryana Handloom, etc., are examples of producers’ cooperative societies.

3. Marketing Cooperative Societies

These are cooperative societies of small producers and manufacturers who find it difficult to sell their products individually. These societies collect the products from the individual members and take the responsibility of selling those products in the market. Gujarat Co-operative Milk Marketing Federation which sells AMUL milk products is an example of a marketing cooperative society.

4. Thrift and Credit Cooperative Societies

These societies are formed to provide financial support to the members. They accept deposits from members and grant them loans at reasonable rates of interest in times of need. Village Service Co-operative Society and Urban Cooperative Banks are examples of cooperative credit societies.

5. Cooperative Group Housing Societies

These are residential societies that are formed to provide residential houses to members. They purchase land and construct houses or flats and allot the same to members.


A Cooperative form of business organization has the following advantages:-

1. Voluntary Organization

It is a voluntary organization that can flourish under both the capitalist and socialist economic systems.

2. Democratic Control

A Cooperative Society is controlled in a democratic manner. The management is democratic, based on the one-man, one-vote concept.

3. Open Membership

Those persons who have common interests can form a cooperative society. Any competent person can become a member at any time he/she likes and can leave society at will.

4. Elimination of Middlemen’s Profit

Generally, the profit of middlemen is eliminated because through cooperatives the members control their own supply of goods, which were purchased by them directly from different manufacturers.

5. Limited Liability

The liability of members in the case of a cooperative society is limited to the extent of capital contributed by them. Unlike sole proprietorship and partnership, the properties of members of cooperative societies are free from any kind of risk because of business

6. Stable Life

A cooperative society has a fairly stable life and it continues to exist for a long period of time. Its existence is not affected by the death, insolvency, lunacy or resignation of any of its members.


Besides the above advantages, the cooperative form of business organization also suffers from various limitations. Let us know these limitations.

1. Lack of Motive

The members do not work with full zeal and devotion as there is no profit motive.

2. Limited Capital

The amount of capital that a cooperative society can raise from its member is very limited because the membership is generally confined to a particular section of the society.

3. Problems in Management

The management of a cooperative may not be particularly competent, because a cooperative generally offers only low scales of remuneration to the staff employed.

4. Lack of Commitment

The success of a cooperative depends on the loyalty of its members, something that is neither assured nor can be enforced.

5. Lack of Cooperation

Cooperative societies are established with the objective of mutual cooperation. But it is generally seen that there is a lot of friction between the members because of personality differences, ego clashes, etc. The selfish attitude of members may sometimes being an end to society.




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