Discuss the special features of a cooperative form of organization. How is it different from a company?
Special features of a cooperative form of organisation are as follows:
Voluntary association: Any person can be a part of such an organisation and become a member irrespective of his caste, religion, colour etc. Without any intimidation, members come together to form themselves into an association. A person can join and leave such an organisation as per his wish.
Autonomy and stability: A cooperative organisation has got a perpetual life i.e. it is not affected by the coming and going of members. It also enjoys a separate and independent entity different from that of its members.
Capital: Members provide the capital in the form of share capital. Such a source is not sufficient for the business to prosper. Large part of capital is raised by the way of loan from government and other cooperative institutions and even by way of grants and assistance from central and state government.
Service motive: The main motive of any co-operative society is to provide service to its members. In other words, such an organisation is service oriented. But other forms of organisations work in order to earn profits.
Limited return on capital: In such an organisation, shareholders have major share in the profits because of the capital they have contributed. As per the Cooperative Societies Act, rate of dividend is limited to 9% to be paid to the shareholders.
It is entirely different from a company in the following ways:
Formation: No long and complicated legal formalities are required at the time of formation. Any ten adults can as per their wish form themselves into an association and get it registered with the Registrar of Cooperatives. Whereas in a company, many legal formalities are to be performed at the time of registration. It is very expensive and complicated to promote a company.
Social services: Cooperatives impart moral and educative values in the members so that they can live in a better way Whereas in case of a company, such values are not imparted.
Motive: In a cooperative form of organisation, service is the main motive. It works to provide service to its members. Whereas in a company, profit is the main motive. Companies are generally profit oriented firms. Such firms work in order to earn profits.
Specific regulation: Cooperative organisations are regulated under the Cooperative Societies Act, 1912. Whereas the companies are regulated under the Companies Act, 1956.
Number of members: A private limited company can be formed by minimum two and maximum fifty members. A public limited company can be formed by minimum seven members and there is no maximum limit. Whereas, cooperative organisations can be formed with minimum ten members and there is no maximum limit.
Tax liability: Companies are heavily taxed and the income earned by them is double taxed. On the other hand, cooperative organisations are exempted from paying income tax.
Capital: In case of a company, large capital resources are required and any amount of capital can be raised by issuing shares and debentures. Whereas, no substantial resources are required in case of cooperative organisations.