The ultimate objective of all major forms of business organizations is to earn profit.

The
cooperative institution is another form of organization whose principal objective is not to earn
profit but to render service to its members.
Cooperative enterprises are generally set up by the individuals of the weaker sections to
safeguard their own interest by eliminating middlemen and exploitation.
A co-operative society is entirely different from all other forms of business organization. It
protects the interests of the weaker sections of the society. It is a voluntary association of
persons joined together on the basis of equality for fulfillment of their economic and business
interests.
Who can form Co-operative Societies?
A group of ten persons can form a co-operative society. In India, such societies function under the
Co-Operative Societies Act, 1912 and other State Cooperative Societies Acts.
The main objectives of co-operative society are
1. To render service rather than earning profit,
2. To provide mutual help instead of competition. and
3. To offer self help
Why are Co-operative Societies formed?
Co-operative societies are formed with the principles of co-operation. It is formed primarily to
render services to its members. It also provides some service to the society.
On the basis of objectives, various types of Co-operatives are formed. They are Consumer co-
operatives, Producers co-operatives, Marketing co-operatives, Housing Co-operatives and Credit
Co-operatives.
Features of Co-operative Societies
1. It is a voluntary association of persons. Individuals having common interest can join together to
form a co-operative society.
2. To form a co-operative society, there has to be a minimum number of 10 members. It can have
unlimited members at maximum.
3. Co-operative societies has to be compulsorily registered under the Co-operative Societies Act..
4. Co-operative society can enjoy perpetual succession.
5. It has its own common seal.
6. It can own property in its name and enter into contract with others.
7. It can sue others in court of law.
8. The aim of any co-operative society is to provide service to its members and to the society in
general.
9. Each member has got the right to vote and can take part in the management of the society.
10. A co-operative society starts with a fund contributed by its members in the form of units called
shares. The capital of the co-operative society is the funds provided by the members by purchasing
shares. It can also raise loans and obtain grants from the government easily.
11.Members of a Co-operative society enjoy a fixed rate of dividend after deduction from the
profit for the capital subscribed.
Advantages of Co-operative Societies
1. It is easy to form a co-operative society. Any ten persons can join together and voluntarily form
an association. They can register themselves with the Registrar of Co-operative societies.
2. The liability of every member is limited to the extent of capital contributed by him.
3. Any individual can be a member of any co-operative society.
4. Co-operatives get a financial assistance from the State governments and enjoys exemptions and
concessions in taxes.
5. The middleman’s profit is eliminated as the consumers control their own supplies through co-
operative societies.
6. Each member has only one vote. Hence, it is managed in democratic manner.
7. It has got perpetual succession and enjoys legal entity.
Disadvantages of Co-operative Societies
1. The amount of capital generated by co-operative society is limited because of the members
belonging to same locality or region or a particular section of people.
2. Co-operatives do not function efficiently due to lack of managerial abilities.
3. It does not enjoy professionalism as they cannot employ professionals at initial stages due to
limited funds.
4. Co-operatives, are formed to render service to its members than to earn profit. This motive does
not encourage co-operatives to function effectively.
5. Among the members, there exists lot of conflicts due to personality differences, ego etc.
6. Secrecy cannot be maintained in co-operative societies.
7. The co-operative societies mostly depend on government for financial assistance.
8. Co-operative societies are not suitable for business organizations that has objective to earn
profit..
Features of cooperative societies

1. Voluntary Association
A co-operative society is a voluntary association of persons and not of capital. The membership is
open to all having a common interest. Persons can become members at their free will and also
free to leave it at anytime by giving a due notice to the society.
2. Open Membership
Any person, irrespective of his caste, sex, creed, beliefs and religion can become a member of a
co-operative society. New members are always allowed to the society. As there is no restriction
on the number of members, the membership list is not closed at any time.
3. Equality in Voting
Each member irrespective of his capital contribution, has one vote and hence an equal right to
take part in its management. “One man one vote” is the principle of the co-operative form of
organization.
4. Democratic Management
Co-operative societies are managed on democratic lines. It is the rule of the co-operatives. The
members from among themselves at the annual general meetings elect the Board of Directors,
and the management is entrusted to them. The Board is responsible and answerable to the general
body of shareholders as regards the management of the society.
5. Fixed Return on Capital
Under the co-operative system, capital is not given undue preference. It is rewarded in the form
of a limited rate of interest, which is normally restricted to the rate, which ranges from 5% to 6%
under the Co-operative Societies Act.
6. Disposal of Surplus
The word “Surplus” denotes the excess of income over all the expenses including the provisions
made for reserves. This surplus is distributed to the members in the form of bonus in proportion
to the business transacted by the individual members with the society. But in the other forms of
organization, the surplus is distributed on the basis of their capital contribution.
7. Body Corporate
A co-operative society is formed and registered under the Co-operative Societies Act, which
renders it a body corporate. It has perpetual succession. Being a legal person, it enjoys certain
privileges like a company on its incorporation.
8. Service Motto
The primary objective of co-operative society is to render service to its members.
9. Trading on Cash Basis
Most of the co-operatives prefer only cash transactions and avoid credit system. Hence, they
follow cash and carry system in its operation, which is the universal feature of the cooperative
organization. However, a few societies give credit to its members under certain circumstances.