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A co-operative society is a type of business structure in India that is formed by a group of individuals who come together voluntarily to promote their mutual economic, social, and cultural interests. Co-operative societies are governed by the Co-operative Societies Act, 1912, or respective state co-operative laws. Here are some pros and cons of starting a co-operative society in India:
Co-operative societies operate on the principle of “one member, one vote,” ensuring equal representation and democratic control over the society’s decision-making processes.
Members of a co-operative society have limited liability, which means their personal assets are not at risk to cover the society’s debts and liabilities. The liability of members is limited to the value of their shares in the society.
Support from the government:
Co-operative societies often receive financial and infrastructural support from the government, such as subsidies, grants, and tax benefits, which can help reduce the cost of starting and operating the society.
Social and community development:
Co-operative societies can promote social and community development by focusing on the needs and aspirations of their members and the local community.
Profits generated by a co-operative society are distributed among its members based on their participation in the society’s activities, ensuring a fair and equitable distribution of wealth.
Limited access to capital:
Co-operative societies may face challenges in raising capital compared to other business structures, as they cannot issue shares to the public or attract external investors.
Co-operative societies are subject to various legal and regulatory requirements, which can be time-consuming and bureaucratic, particularly when dealing with government agencies.
Due to the democratic nature of co-operative societies, decision-making can be slow and cumbersome, as it requires the consensus of a majority of the members.
Lack of professional management:
Co-operative societies are often managed by their members, who may lack the necessary skills and expertise to run a business efficiently and effectively.
Potential for conflicts:
Co-operative societies can face conflicts among members due to differing opinions, values, and interests, which can negatively impact the society’s operations and growth potential.
In conclusion, the decision to start a co-operative society in India should be based on factors such as the nature of the business, the level of collaboration and trust among members, and the potential benefits for the community. It is essential to consult a legal or financial expert to understand the most suitable business structure for your specific needs.