Introduction:

Organisation is born when more than one person co-ordinates to do a work; such as a person
passing bundles to another person to keep them in order. People helping one another in work
constitute an organisation.

Organisation refers to a way in which the component of an enterprise is put into working order, so
as to achieve the objectives of the firm. The components of organisation consist of men, machine,
materials, methods, money, functions, authority and responsibility.

Organisation involves division of work among people whose effort must be coordinated to achieve
specific objectives and to implement predetermined strategies. Organisation is the foundation upon
which the whole structure of management is built.

Types of organization:

 Sole proprietorship
 Partnership
 Public company
 Private company
 Cooperative society

Sole proprietorship:
Proprietorship (also called sole trade organisation) is the oldest form of business ownership in
India. In a proprietorship, the enterprise is owned and controlled by one person. He is master of his
show. He sows, reaps, and harvests the output of this effort. He manages the business on his own. If
necessary, he may take the help of his family members, relatives and employ some employees.

Sole proprietorship is the simplest and easiest to form. It does not require legal recognition and
attendant formalities. This form is the most popular form in India due to the distinct advantages it
offers. William R. Basset opines that “The one-man control is the best in the world if that man is
big enough to manage everything”.
Main Features:
The main features of proprietorship form of business can be listed as follows:

1. One Man Ownership:

In proprietorship, only one man is the owner of the enterprise.

2. No Separate Business Entity:

No distinction is made between the business concern and the proprietor. Both are one and the same.

3. No Separation between Ownership and Management:

In proprietorship, management rests with the proprietor himself/herself. The proprietor is a
manager also.

4. Unlimited Liability:
Unlimited liability means that in case the enterprise incurs losses, the private property of the
proprietor can also be utilized for meeting the business obligations to outside parties.

5. All Profits or Losses to the Proprietor:

Being the sole owner of the enterprise, the proprietor enjoys all the profits earned and bears the full
brunt of all losses incurred by the enterprise.

6. Less Formalities:
A proprietorship business can be started without completing much legal formalities. There are
some businesses that too can be started simply after obtaining necessary manufacturing licence and
permits.

Advantages:
The various advantages that proprietorship form of business offers are as follows:
1. Simple Form of Organisation:
Proprietorship is the simplest form of organisation. The entrepreneur can start his/her enterprise
after obtaining license and permits. There is no need to go through the legal formalities. For
starting a small enterprise, no formal registration is statutorily needed.
2. Owner’s Freedom to Take Decisions:
The owner, i.e. the proprietor is free to make all decisions and reap all the fruits of his labour. There
is no other person who can interfere or weigh him down.

3. High Secrecy:
Secrecy is another major advantage offered by proprietorship. This is because the whole business
is handled by the proprietor himself and, as such, the business secrets are known to him only.

Added to it, the proprietor is not bound to reveal or publish his accounts. In present day business
atmosphere, the less a competitor knows about one’s business, better off one is. What the
competitors can make is guesstimates only.

4. Tax Advantage:
As compared to other forms of ownership, the proprietorship form of ownership enjoys certain tax
advantages. For example, a proprietor’s income is taxed only once while corporate income is, at
occasions taxed twice, say, double taxation.

5. Easy Dissolution:
In proprietorship business, the entrepreneur is all in all. As there are no co-owners or partners,
therefore, there is no scope for the difference of opinion in the case the proprietor/entrepreneur-
wants to dissolve the business. It is due to the easy formation and dissolution, proprietorship is
often used to test the business ideas.

Disadvantages:
Proprietorship form of ownership suffers from some disadvantages also.
The important ones are:
1. Limited Resources:
A proprietor has limited resources at his/her command. The proprietor mainly relies on his/her
funds and savings and, to a limited extent, borrowings from relatives and friends. Thus, the scope
for raising funds is highly limited in proprietorship. This, in turn’ deters the expansion and
development of an enterprise.
2. Limited Ability:
Proprietorship is characterised as one-man show. One man may be expert in one or two areas, but
not in all areas like production, finance, marketing, personnel, etc. Then, due to the lack of
adequate and relevant knowledge, the decisions taken by him be imbalanced.

3. Unlimited Liability:
Proprietorship is characterised by unlimited liability also. It means that in case of loss, the private
property of the proprietor will also be used to clear the business obligations. Hence, the proprietor
avoids taking risk.

4. Limited Life of Enterprise Form:

The life of a proprietary enterprise depends solely upon the life of the proprietor. When he dies or
becomes insolvent or insane or permanently incapacitated, there is very likelihood of closure of
enterprise. Say, enterprise also dies with its proprietor.

Partnership firm:

Definition:
The proprietorship form of ownership suffers from certain limitations such as limited resources,
limited skill and unlimited liability. Expansion in business requires more capital and managerial
skills and also involves more risk. A proprietor finds him unable to fulfill these requirements. This
call for more persons come together, with different edges and start business. For example, a person
who lacks managerial skills but may have capital.
Another person who is a good manager but may not have capital. When these persons come
together, pool their capital and skills and organise a business, it is called partnership. Partnership
grows essentially because of the limitations or disadvantages of proprietorship.

Let us consider a few definitions on partnership:

The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between persons
who have agreed to share the profits of business carried on by all or any of them acting for all”. The
Uniform Partnership Act of the USA defined a partnership “as an association of two or more
persons to carry on as co-owners a business for profit”.
According to J. L. Hanson, “a partnership is a form of business organisation in which two or more
persons up to a maximum of twenty join together to undertake some form of business activity”.
Now, we can define partnership as an association of two or more persons who have agreed to share
the profits of a business which they run together. This business may be carried on by all or anyone
of them acting for all.

The persons who own the partnership business are individually called ‘partners’ and collectively
they are called as ‘firm’ or ‘partnership firm’. The name under which partnership business is
carried on is called ‘Firm Name’. In a way, the firm is nothing but an abbreviation for partners.

Main Features:
Based on the above definitions, we can now list the main features of partnership form of business
ownership/organisation in a more orderly manner as follows:
1. More Persons:
As against proprietorship, there should be at least two persons subject to a maximum of ten persons
for banking business and twenty for non-banking business to form a partnership firm.

2. Profit and Loss Sharing:

There is an agreement among the partners to share the profits earned and losses incurred in
partnership business.

3. Contractual Relationship:
Partnership is formed by an agreement-oral or written-among the partners.

4. Existence of Lawful Business:

Partnership is formed to carry on some lawful business and share its profits or losses. If the purpose
is to carry some charitable works, for example, it is not regarded as partnership.

5. Utmost Good Faith and Honesty:

A partnership business solely rests on utmost good faith and trust among the partners.

6. Unlimited Liability:
Like proprietorship, each partner has unlimited liability in the firm. This means that if the assets of
the partnership firm fall short to meet the firm’s obligations, the partners’ private assets will also be
used for the purpose.

7. Restrictions on Transfer of Share:

No partner can transfer his share to any outside person without seeking the consent of all other
partners.

8. Principal-Agent Relationship:
The partnership firm may be carried on by all partners or any of them acting for all. While dealing
with firm’s transactions, each partner is entitled to represent the firm and other partners. In this
way, a partner is an agent of the firm and of the other partners.

Advantages:
As an ownership form of business, partnership offers the following advantages:
1. Easy Formation:
Partnership is a contractual agreement between the partners to run an enterprise. Hence, it is
relatively ease to form. Legal formalities associated with formation are minimal. Though, the
registration of a partnership is desirable, but not obligatory.

2. More Capital Available:

We have just seen that sole proprietorship suffers from the limitation of limited funds. Partnership
overcomes this problem, to a great extent, because now there are more than one person who
provide funds to the enterprise. It also increases the borrowing capacity of the firm. Moreover, the
lending institutions also perceive less risk in granting credit to a partnership than to a
proprietorship because the risk of loss is spread over a number of partners rather than only one. .

3. Combined Talent, Judgement and Skill:

As there are more than one owners in partnership, all the partners are involved in decision making.
Usually, partners are pooled from different specialised areas to complement each other. For
example, if there are three partners, one partner might be a specialist in production, another in
finance and the third in marketing. This gives the firm an advantage of collective expertise for
taking better decisions. Thus, the old maxim of “two heads being better than one” aptly applies to
partnership.

4. Diffusion of Risk:
You have just seen that the entire losses are borne by the sole proprietor only but in case of
partnership, the losses of the firm are shared by all the partners as per their agreed profit-sharing
ratios. Thus, the share of loss in case of each partner will be less than that in case of proprietorship.

5. Flexibility:
Like proprietorship, the partnership business is also flexible. The partners can easily appreciate and
quickly react to the changing conditions. No giant business organisation can stifle so quick and
creative responses to new opportunities.

6. Tax Advantage:
Taxation rates applicable to partnership are lower than proprietorship and company forms of
business ownership.

Disadvantages:
In spite of above advantages, there are certain drawbacks also associated with the partnership form
of business organisation.

Descriptions of these drawbacks/ disadvantages are as follows:

1. Unlimited Liability:
In partnership firm, the liability of partners is unlimited. Just as in proprietorship, the partners’
personal assets may be at risk if the business cannot pay its debts.

2. Divided Authority:
Sometimes the earlier stated maxim of two heads better than one may turn into “too many cooks
spoil the broth.” Each partner can discharge his responsibilities in his concerned individual area.
But, in case of areas like policy formulation for the whole enterprise, there are chances for conflicts
between the partners. Disagreements between the partners over enterprise matters have destroyed
many a partnership.
3. Lack of Continuity:
Death or withdrawal of one partner causes the partnership to come to an end. So, there remains
uncertainty in continuity of partnership.

4. Risk of Implied Authority:

Each partner is an agent for the partnership business. Hence, the decisions made by him bind all the
partners. At times, an incompetent partner may lend the firm into difficulties by taking wrong
decisions. Risk involved in decisions taken by one partner is to be borne by other partners also.
Choosing a business partner is, therefore, much like choosing a marriage mate life partner.

Public company:

A public limited company is a voluntary association of members that are incorporated and,
therefore has a separate legal existence and the liability of whose members is limited.

Public limited companies are listed on the stock exchange where it’s share/stocks are traded
publicly.

features

1. The company has separate legal existence apart from its members who compose it.
2. Its formation, working and it’s winding up all its activities are strictly governed by rules,
laws, and regulations.
3. A company must have a minimum of seven members but there is no limit as regards the
maximum number.
4. The company collects Its capital by the sale of its shares and those who buy the shares are
called the members. The amount so collected is called the share capital.
5. The shares of a company are freely transferable and that too without the prior consent of
other shareholders or subsequent notice to the company.
6. The liability of a member of a company is limited to the face value of the shares he owns.
Once he has paid the whole of the face value, he has no obligation to contribute anything to
pay off the creditors of the company.
 7. The shareholders of a company do not have the right to participate in the day-to-day
management of the business of a company. This ensures the separation of ownership from
management. The power of decision making in a company is vested in the Board of
Directors, and all policy decisions are taken at the Board level by the majority rule. This
ensures the unity of direction in management.

Advantages of Public Limited Company

A public limited company is a form of business organization that operates as a separate legal entity
from its owners. It is formed and owned by shareholders.

Shares of a public limited company are listed and traded at a stock exchange market freely.
Shareholders of a public limited company are limited to potentially lose only the amount they have
paid for the shares they own.

So, some advantages of a public limited company are;

 Led by Board of Directors

 Limited Liability
 Number of Members
 Transferable shares
 Life Span
 Financial Privacy
 Large Capital
Led by Board of Directors

Public limited companies are headed by a board of directors. The composition of the board of
directors is set out in the company’s articles of association.

Normally it comprises a minimum number of two members and a maximum of 12.

These are elected from the shareholders by the shareholders during the annual general meeting.
They act as the representatives of the shareholders in the management of the company.
Limited Liability

Shareholder liability for the losses of the company is limited to their share contribution only. This
is what makes it a separate legal entity from its shareholders.

The business can be sued on its own and not involve its shareholders. The company does not
belong to any person since one person can own only a part of it.

Number of Members

A public limited company has a minimum number of seven shareholders or members and a
limitless number of members. It can have as many shareholders as its share capital can
accommodate.

Transferable shares

Shares of a public limited company are bought and sold in a stock exchange market. They are
freely transferable between its members and people trading in the stock exchange.

Life Span

A public limited company is not affected by the death of one of its shareholders, but her shares are
transferred to the next of kin and the company continues to run its business as usual.

In the case of a director’s death, an election is held to replace the deceased director.

Financial Privacy

Public limited companies are strictly regulated and are required by law to publish their complete
financial statements annually.

This ensures that they reveal their true financial position to their owners and potential investors so
that they can determine the true worth of its shares.
Large Capital

Public limited companies enjoy an increased ability to raise capital since they can issue shares to
the public through the stock market.

They can also raise additional capital by Issuing debentures and bonds through the same market
from the public. Debentures and bonds are unsecured debts Issued to a company on the strength of
its integrity and financial performance.

Disadvantages of a Public Limited Company

A Public Limited Company (PLC) means, first, that the firm is parceled out into shares and sold
“publicly” on any or the entire globe’s stock exchanges.

Secondly, it means that those who invest in the firm are protected from extreme loss if the company
fails.

This is called “limited liability.” This means that if one invests in a firm that fails, only that
investment money can be claimed by the firm’s creditors.

More abstractly, “limited” means that only the existing assets of the firm can be seized for the
payment of a debt.

So, some disadvantages of a public limited company are;

 High Costs.
 Public Books.
 Greedy Shareholders.
 Takeover.
 Power.
 Slow Decisions.
High Costs
A Public Limited Company is normally a complex thing to start. The firm banker (or
“underwriter”) then offers the initial shares to the public (and keeps a substantial commission).

Often, the costs of setting up a public firm and Initial Public Offering (IPO) can run into hundreds
of thousands of dollars.

Public Books

The term “public” here is to be taken literally. Once a firm goes public, the firm is open to public
inspection. The financial books and records of the firm are open to anyone, allowing the
competition to see precisely how much profit or loss the firm is experiencing.

Greedy Shareholders

Those who buy shares have no particular interest in the firm except in that it makes a quick buck.

Most companies, however, have an interest in laying out a longterm growth plan that takes patience
and planning It is not often many shareholders see it this way.

Takeover

Since the company is now “public,” anyone can buy up shares, and there is no limit as to how many
shares one can buy.

Under certain circumstances, hostile investors might buy up a large amount of stock, giving them a
strong voice on the board of dimeters.

In this case, a firm that was built up by one group (or poison) can now be taken over by others since
the firm has gone public

Power
Going “public” means a certain lack of control by the founders of the firm. In some cases, the firm
can be controlled by a board of directors who do not necessarily have the time for hands-on
business management.

Therefore, ownership can be separated from control. If this is the case, then those who control the
business do not own it and do not see a profit. This is not an incentive (necessarily) to rational
management.

Slow Decisions

If the company is public, it must have a board of directors representing the main and most powerful
stockholders.

This means, in turn, that major decisions must go through the board, with debates and voting. In
reality, this entails that decisions will be slow and often painful. Sometimes, they might not be
made at all.

Private limited company:

Private limited company features

Formally registered. Businesses are registered as formal legal entities and must have important
documents such as articles of association and taxation.

Separate legal entity.

This business organization has a separate legal identity from its owner. The company’s finances are
separate from the owner’s personal finances. Likewise, legal disputes or corporate debt problems
are not the responsibility of the owner as a person.

Owner. They are known as shareholders. The company has at least one shareholder. They may be
individuals, trusts, associations, or other companies.
Limited liability.

Shareholders have limited liability. The company’s debt is not their personal responsibility. Thus,
when a company goes bankrupt or fails to pay its debts, shareholders have limited liability.
Shareholders’ personal assets cannot be taken to pay off debts. They simply lost the capital they had
invested in the business.

Ownership.

The owner’s interest in the company is equal to the number of shares they own. If companies
distribute dividends, they receive a percentage of their shareholding.

Operation.

Shareholders appoint the Board of Directors to operate the business and act in their best interests.
The Board of Directors is responsible for business operations and makes all business decisions.
And, sometimes, shareholders also serve as directors.

Double tax.

Shareholders pay taxes on their income. And, businesses also pay corporate taxes. So, there is
double taxation.

Private limited company advantages

Liability. Business organizations have limited liability. It allows protecting the owner’s wealth. In
addition, the company’s debt is not their obligation as a person. So, they don’t have to sell their
assets just to pay off the company’s debts.
Separate legal entity.

Lawsuits against the company do not lead to lawsuits against shareholders because they are a
separate legal entity from its owners.

Resource. Companies usually have a more organized business structure than a sole proprietorship.

Capital.

In addition to capital injections from existing shareholders, companies can also sell shares or issue
debt securities in the capital market. Thus, it is easier for companies to raise funds to support future
growth. When a company sells its shares for the first time (called an initial public offering), it turns
into a public limited company.

Continuity.

The company continues to exist even when the shareholders change. Likewise, when a shareholder
or director dies, it does not cause the company to die.

Control.

The original owner can retain control. And their ownership is not diluted because the company does
not sell its shares to the public through the stock exchange.

Confidentiality.

The company has control over strategic and critical information such as financial statements. On
the other hand, a public limited company must publish some such documents required by the
regulator.
Private limited company disadvantages
Establishment. These business organizations are more difficult to set up and require more
paperwork and requirements. Thus, regulatory costs (legal and administrative) are also expensive.
In addition, in some countries, obtaining legal formalities can be time-consuming due to acute
bureaucratic problems.

Dividend.

Shareholders may not earn income from dividends. The company may not distribute dividends and
reinvest them into the business (known as retained earnings). So, no money goes to the owner.

Complexity.

Business operations are more complex and involve a lot of documents, including standard financial
statements and taxation.

Transparency.

The public or regulators find it more difficult to obtain information about companies, such as their
financial statements. Unlike a public limited company, a private limited company is not bound by
rules to publish such information.

Conflict of interest.

Directors may pursue their own interests and profits, ignoring the interests of the owners. That’s
because the business decisions are under the directors, not the owners, in contrast to a sole
proprietorship where the business decisions are in the owners’ hands. That can then give rise to
agency problems.
Transfer of ownership.

Old shareholders find it difficult to sell their shares because they are not publicly traded through the
stock exchange. They can only sell their shares with the approval of other shareholders. Likewise,
new shares issued cannot be sold on the open market.
What is the Difference between Private and Public Limited Company?

The main difference between a private and public company is that public company is allowed to
raise capital by selling shares on the stock exchange, where private limiteds are not allowed to
publicly traded stock.

Even though both private and public limited companies types are registered and incorporated
under the same Company Act.

Common differences between a private and public limited company are;

Features Private Limited Company Public Limited Company

Minimum number
2 7
of members

Maximum
number of 50 Unlimited
members

Number of
At least 2 At least 3
Directors

Transferability of
Complete restriction There is no restriction.
shares
Issue of
Prohibited Can issue a Prospectus.
Prospectus

Directors of a Public Company must

Consent of the There is no need to give the consent by
have a file with the Registrar consent to
directors the directors of a Private Company
act as Director of the company.

Directors of a Public Company are

The Directors of a Private Company
Qualification required to sign an undertaking to
need not sign an undertaking to acquire
shares acquire the qualification shares of the
the qualification shares
public Company.

a Public Company cannot start its

A Private Company can commence its
Commencement business until a Certificate to
business immediately after its
of Business commencement of business is issued to
incorporation
it.

Public Company is free to invite the

A Private Company cannot issue Share
Shares Warrants public for subscription i.e., a Public
Warrants against its fully paid shares
Company can issue a Prospectus.

Public Company has to offer the further

issue of shares to its existing
shareholders as the right shares.
A Private Company need not offer the
Further issue of
further issue of shares to its existing Further issues of shares can only be an
shares
shareholders offer to the general public with the
approval of the existing shareholders in
the general meeting of the shareholders
only
 Must call its statutory Meeting and file a
Has no obligation to call the Statutory
Statutory meeting Statutory Report with the Register of
Meeting
Companies

5 members must be present personally

Quorum 2 members present (However, the Articles of Association

may provide and several members more
than the required under the Act.)

Following are the main distinction between a public company and a private company:-

Minimum number of members

The minimum number of members required to form a private company is 2, whereas a Public
Company requires at least 7 members.

Maximum number of members

The maximum number of members in a Private Company is restricted to 50; there is no restriction
of a maximum number of members in a Public Company.

Transferability of shares

There is a complete restriction on the transferability of the shares of a private Company through its
Articles of Association, whereas there is no restriction on the transferability of the shares of a
public company

Issue of Prospectus

A Private Company is prohibited from inviting the public for the subscription of its shares, i.e. a
Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for
subscription i.e., a Public Company can issue a Prospectus.
Number of Directors

A Private Company may have 2 directors to manage the affairs of the company, whereas a Public.
A company must have at least 3 directors.

Consent of the directors

There is no need to give the consent by the directors of a Private Company, whereas the Directors
of a Public Company must have a file with the Registrar consent to act as Director of the company.

Qualification shares

The Directors of a Private Company need not sign an undertaking to acquire the qualification
shares, whereas the Directors of a Public Company are required to sign an undertaking to acquire
the qualification shares of the public Company.

Commencement of Business

A Private Company can commence its business immediately after its incorporation, whereas a
Private Company cannot start its business until a Certificate to commencement of business is
issued to it.

Shares Warrants

A Private Company cannot issue Share Warrants against its fully paid shares, whereas a Private
Company can issue Share Warrants against its fully paid-up shares.

Further issue of shares

A Private Company need not offer the further issue of shares to its existing shareholders, whereas a
Public Company has to offer the further issue of shares to its existing shareholders as right shares.

Further issues of shares can only be an offer to the general public with the approval of the existing
shareholders in the general meeting of the shareholders only.
Statutory meeting

A Private Company has no obligation to call the Statutory Meeting of the member, whereas Public
Company must call its statutory Meeting and file Statutory Report with the Register of Companies.

Quorum

The quorum in the case of a Private Company is 2 members present personally, whereas in the case
of a Public Company 5 members must be present personally to constitute a quorum.

However, the Articles of Association may provide and several members more than the required
under the Act.

Cooperative society:

A co – operative society is a voluntary association of persons of moderate means , who unite

together to protect and promote their common economic and social interests. It is based on the
principles of collective effort, mutual self – help, equality, democracy, distributive justice and
freedom. It represents an attempt by poor and weaker persons to protect themselves against the
exploitation and oppression of the economically strong .

The term cooperation is derived from the Latin word ‘co-operari’, where the word “co” means
‘with’ and “operari” means ‘to work’. Thus, the term cooperation means working together. So
those who want to work together with some common economic objectives can form a society,
which is termed as cooperative society.

Features:
Voluntary Association
The membership of cooperative societies is voluntary. A person can join cooperative society
anytime or leave as per his desire. Religion, gender & caste do not matter in cooperative society.
Membership is open to all the people.

Number Of Members
A minimum of 10 members are required to form a cooperative society. In multi-state cooperative
societies the minimum numbers of member is 50 from each state in case the member are
individuals. The Cooperative Society act does not specify the maximum numbers of the
cooperative society members.

Registration Of The Cooperative Society

In India the cooperative societies registered under Cooperative Societies Act 1912 or the state
Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-
State Cooperative Societies Act 2002. Once the society registered, the Society becomes a
separate legal entity.

State Control
Since registration of cooperative societies became compulsory. From that period the every
cooperative society came under the control and supervision of the government.

Return On Capital Investment

The members get return on their capital investment in the form of dividend. When the new
member joins the society he/she needs to give some registration fees and needs to deposit some
mandatory amount every month. At the end of financial year members get some return on their
capital investment.

Democratic Management
The management of co-operative society is based on democratic lines. A body of members is
elected to conduct and control the business. The body is elected through ‘one-man-one-vote-
system’. Members can give their suggestions, opinions and problems.

Service Motive
The formation of co-operatives is based on service motive rather than a profit motive. Its objects
to serve their members and not to maximize the profits. These societies provide different types of
service to their members.

Equality Of Voting Rights

The main principle of co-operative society is “one man one vote”. Irrespective management of a
co-operative society is democratic. All important decisions are taken by majority.

Types:
Consumers’ Co-Operative Societies
Such Societies are organised by the consumers to avoid exploitation by the middleman and to
ensure steady supply of consumer goods and services at fair prices. A consumer’s co – operative
store purchase the consumers good either from the manufacturers or the wholesalers and then
sells them to its members at reasonable prices. The profits made by the society during a year are
utilized for strengthening the reserve fund of the society, for declaring a moderate rate of
dividend and for declaring a bonus to members according to the purchases made by them from
the cooperative store.

Producers’ Co-Operative Societies

The societies are by the small producers to fight against the big producers. It assists the member
who need capital, materials and equipment to use their skills for the production of goods and
services. The society supplies these things to the members and takes over their purchases for
sale. Thus, a producers ‘ society not only provides money and materials to the small artisans but
also undertakes to sell their products.

Co-Operative Marketing Societies

Co-operative marketing societies are voluntary associations of small producers, who find it
difficult to individually sell their products at a profit. The main purpose of such a society is to
ensure a steady and favourable market for the output of its members. The output is pooled
together and sold at the best price. The sale proceeds are distributed in proportion to the
contribution of the members to the pool. Marketing co-operatives eliminate middleman and
ensure honest trading practices in weighing, measuring and accounting.

Credit Co-Operative Societies

Such societies are formed to provide financial help in the form of loans to members. The funds
of these societies consist of share capital contributed by the members and the deposits made by
them and outsiders. The funds are used in giving loans to needy members on easy terms. Thus,
the members are protected from the exploitation of money lenders, who charge exorbitant rates
of interest Another important purpose of creditco – operatives is to encourage the habit of thrift
among their members.

Farmers’ Co-Operative Societies

In co-operative farming societies, small farmers join together and pool their resources for
cultivating the land collectively. Their object is to achieve economies of large scale farming and
maximising agricultural output. Such societies are particularly important in the case of countries
like India , where agriculture suffers from excessive sub – division and fragmentation of land .
Co – operative farming makes it possible for members to use modern tools and equipments good
seeds, fertilizer and irrigation facilities in order to achieve higher production.

Cooperative Housing Societies

Cooperative housing societies are established to help people with limited income to construct
houses or flats at reasonable costs. The members of these societies consist of people want
residential accommodation at lower costs. The aim is to solve the housing problems of the
members by constructing and giving the option of paying in installments. These societies procure
land from the government and construct flats or provide plots to members on which the members
themselves can construct the houses as per their choice.

advantages
Ease Of Formation
A co – operative society is a voluntary association and may be formed with a minimum of ten
adult members. Its registration is very simple and can be done without much legal formalities.

Open Membership
Membership in a co-operative organisation is open to all having a common interest. A person can
become a member at any time he likes and can leave the society by returning his shares without
affecting its continuity.

Democratic Management
A co-operative society is managed in a democratic manner. It is based on the principle of one –
man-one-vote. All members have equal rights and can have a voice in its management.
Limited Liability
The liability of the members of a co – operative society is limited to the extent of capital
contributed by them. They do not have to bear personal liability for the debts of the society.

Stability
A co – operative society has a separate legal existence. It is not affected by the death , insolvency
, lunacy or permanent incapacity of any of its members. It has a fairly stable life and continues to
exist for a long period.

Promotion Of Social Values

The cooperative societies promote social justice and mutual cooperation. They promote self help,
moral value among the members. They also help to prevent concentration of economic power in
few hands.

Disadvantages:

Inefficiency In Management
Cooperative societies are unable to attract and employ expert managers because of their inability
to pay them high salaries. The members who offer honorary services on voluntary basis are
generally not professionally equipped to handle the management functions effectively.

Lack Of Motivation
In cooperative organisation , there is no direct link between efforts and reward. Hence , members
are not inclined to put their best efforts . There is no incentive for working efficiently.

Conflicts Among Members

The members are from different sections of society. They may have difference of opinion and if
any member follows rigid attitude, it can lead to conflicts. Generally, the selfish motive of
members starts dominating and they forget the service motive .