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.
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