Write short note on merits of Co-operative society.
Answers
Advantages:
1. Easy Formation:
Compared to the formation of a company, formation of a cooperative society is easy. Any ten adult persons can voluntarily form themselves into an association and get it registered with the Registrar of Co-operatives. Formation of a cooperative society also does not involve long and complicated legal formalities.
2. Limited Liability:
Like company form of ownership, the liability of members is limited to the extent of their capital in the cooperative societies.
3. Perpetual Existence:
A cooperative society has a separate legal entity. Hence, the death, insolvency, retirement, lunacy, etc., of the members do not affect the perpetual existence of a cooperative society.
4. Social Service:
The basic philosophy of cooperatives is self-help and mutual help. Thus, cooperatives foster fellow feeling among their members and inculcate moral values in them for a better living.
5. Open Membership:
The membership of cooperative societies is open to all irrespective of caste, colour, creed and economic status. There is no limit on maximum members.
6. Tax Advantage:
Unlike other three forms of business ownership, a cooperative society is exempted from income-tax and surcharge on its earnings up to a certain limit. Besides, it is also exempted from stamp duty and registration fee.
Merits of Co-operative society
1) There are no minimum requirements to join or exit a co-operative society. Generally, the membership fees are kept very low so that any one can easily become a member.
2) It is very easy to form a co-operative society. The legal formalities are very simple and all that is required is a minimum of 10 members who are like minded.
3) A co-operative society works on democratic principles, i.e., every member is equal and gets only one vote. Thus, the wealthier members can not buy majority shares and try to influence the organization.
4) The surplus that is made by the society is always distributed equally among the members. Around 10 percent of the surplus is also used to develop the society in which it is located.
5) Each member’s liability is limited to the amount of capital contributed by them and so they are not responsible for the society’s debt.
6) The co-operative society’s legal entity is independent and thus is not affected when the members die or fall sick or leave the society. Thus, its existence is stable.
7) Co-operative society is formed to encourage service towards the society.
8) The government provides support in the form of incentives, tax exemptions and schemes to form co-operative societies.
9) The co-operative society directly connects the producer and consumer. Hence, there is no need for middlemen and also the product quality is maintained while the price remains low.
10) They provide low interest credit to the oppressed class at the rural areas and thus help promote economic growth in these regions.
11) They are independent of external investors as they always have to transfer one fourth of their profits to the society’s general reserve which is used for further investments. This habit, in turn, encourages the members to save money.