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Pankaj Tyagi
| Updated: 04 Mar, 2021 | Category: Society

Cooperative Societies in India- Underlining the Potential Advantages

Advantages of cooperative societies

A cooperative society is a voluntary association founded with the objective of service of its members. In this type of business structure, people belonging to the same class collaborate to promote common goals.

These are usually set up by the people belonging to the lower strata of the society lacking basic amenities to confront life challenges. Practically, cooperative society is considered as a voluntary association financially challenged people who seek to grow through collaborative efforts. In this write-up, you will come across the potential advantages of cooperative societies that ensure the members’ growth. 

What are the Potential Advantages of Cooperative Societies? 

Even though cooperative societies don’t have to larger footprint, they tend to offer some fruitful benefits in the longer run. By following the section below, we will come to know about the potential advantages of cooperative societies.

What are the Potential Advantages of Cooperative Societies

Voluntary Organization

The membership of the cooperative society is accessible to the public domain i.e.; anyone can avail it. Any individual with a common interest can be part of these entities. The membership fee falls in the nominal price regime. Cooperative society largely remains easily accessible without any entry or exit barriers.

Read our article:What is Form B of Society Registration? Get all the updates on cooperative housing society

Easy Setup with Fewer Legal Implications 

Cooperative society formation is not as complicated as other business structures. Any ten members who have acquired the majority can step forward to form a cooperative society by addressing few legal formalities. Dealing with the less legal implication is arguably one of the most touted advantages of cooperative societies. 

Foster Transparency and Equal Rights

A cooperative society excels on the notion of ‘one man, one vote. ‘It indicates that the entire members have equal rights in handling the internal affairs. There is no way any members can influence the management’s decision-making abilities by purchasing majority shares.

Unlike other business models such as partnership and LLP, cooperative society steak with improved transparency and stays harmonized for long. Violation of rights is less likely to occur in such entities, which is one of the significant advantages of cooperative societies. 

Equitable Surplus Distribution

The surplus generated by these societies is dispensed equally among the members. Thus, the entire members are benefited. The 10% of the surplus finds its way to society as a welfare fund.

The generation of surplus not only supports these entities but also benefits society a great deal. One of the potential advantages of cooperative societies is that it stays as transparent as possible when it comes to profit distribution. This helps members to stay coordinated as long as possible. 

Limited Liability

The member’s liability in a cooperative society is confined to the extent of their capital contribution. They cannot be held accountable for the debts of society on an individual basis. 

Rejoice Perpetual Existence 

A cooperative society operates as an autonomous entity- meaning it adheres to a separate legal identity that is distinct from its member. Thus, it rejoices seamless business journey without being interrupted by its members’ death, insanity, or insolvency.

Garner Mutual Welfare 

The voluntary association of the members establishes cooperative societies. Thus, members put in their best effort to foster their common welfare. 

Greater Identity of Interests

It operates in a limited territory, and there is a greater identity of interest among members. Members have liberty to shares their concerns with each other. They can cooperate and oversee the activities of society more efficiently and precisely. 

Government Support

To encourage the growth of cooperatives societies within the country, the government facilitates loans at nominal interest rates and provides growth-centric subsidies. 

Mitigate the Middlemen

Consumer cooperative societies are set up to attain a seamless supply of essential commodities of approved quality at nominal prices. These societies purchase commodities directly from the producers & wholesalers and sell them to the end-users at affordable prices. Therefore, the profits of middlemen are mitigated and a direct connection is established between the manufacturers & the end-users.

Concession on Taxation 

To foster the cooperative movement in India, the government provides various exemptions and tax concessions.

Undermines the Existence of Private Lender in Rural Areas 

Cooperative societies have helped a lot in diminishing the influence of private money lenders in rural areas. Cooperatives facilitate credit at the nominal interest rate and have supported the rural community to a great extent.

The advent of Cooperatives undermines the existence of money lenders in India who were supposed to impose heavy interest rates on the disbursed fund.

Support Agricultural Progress

Cooperative societies have supported the government’s effort to escalate agricultural[1] production. They act as a bridge between the government and farmers. The government disburses High-yielding seeds and fertilizers via cooperatives.

Authority to Reserve Funds

Cooperative societies are under the legal obligation to transfer their ¼ of profit to the general reserve. Thus, it mitigates the requirement of procuring funds from outsiders during the demanding situation. They can leverage the general reserve in tight situation to meet the certain requirements.

Fosters Habit of Saving

Cooperative societies cultivate the habit of saving among their members. They render credit facilities only for productive purposes and not for irrelevant expenditure. 

Mitigate Unfair Price & Bad Quality

Cooperative societies trade in bulk volume directly from the manufacture or to the customers. Before dispatching to the market, the products are processed and graded accordingly. Bulk purchases & sales mitigate unfair prices and mediocre quality. 

Social Benefit

Cooperative societies have played a significant role in modulating social customs and controlling irrelevant expenses. The profits reaped by the cooperatives can be used for facilitating fundamental amenities of the society. 

Conclusion

Cooperative society works on the paradigm of the collaborative effort put by the people who seek to mitigate poverty or other life challenges. With ample government support, these entities tend to grow much faster than other business models. Besides, less compliance make this business form suitable for the people who seek to set up a business with minimum hassles. Setting up a Cooperative society is profitable for those who are willing to start a business with minimum investment and fewer pre-establishment requisites. It is evident from the information above that advantages of cooperative societies in a real-world scenario are practically endless.  

Read our article:What is Multi-State Cooperative Society?

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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