Co-operative - advantages and disadvantages

Co-operatives are democratic organisations, focused on delivering their mission to their members rather than maximising return to investors. Consider a co-op when you have at least five eligible members.

A co-operative is a democratic organisation, owned and controlled by its members for a shared benefit. It is a distinct legal entity from its members or officers.

In Australia, the types of co-operative are:

• ‘Distributing co-operative’: has shares and can distribute profits to members based on level of use of the co-op’s services, or their shareholding.
• ‘Non-distributing co-operative’: may or may not have shares and cannot distribute profits to members. Profits are re-invested into improved products and services.

Co-operatives based in Tasmania are regulated by Consumer, Building and Occupational Services, which administers the Co-operatives National Law in the state.

Advantages of a co-operative include that:

• there are equal voting rights for members
• this structure encourages member contribution and shared responsibility
• liability for members is limited
• there is no limit on the number of members

Disadvantages of a co-operative include that:

• members have equal voting rights regardless of investment - which may not suit an investor-driven business
• legal limits on payments of dividends on shares may not suit an investor-driven business

Find out more about co-operatives at getmutual.coop