Advantages and disadvantages of Cooperatives

A cooperative is a business or housing development that is owned by its members. These members have the responsibility to vote for other members, even if the company is still publicly traded. If you are considering joining or starting a cooperative, it is important to consider the advantages and disadvantages before doing so.

Advantage: Cost Sharing

The main characteristic of a cooperative is that all members are responsible for the company and for collaborating in its administration. Some of these members must cooperate by sharing the expenses of the business or housing development. An artist’s studio space can function as a cooperative, where several artists share the rent in order to have a bigger and better studio. As far as a company is concerned, the members of the cooperative would have to share the investment in advertising and other expenses.

Advantage: Equal Supervision

All members of a cooperative must be involved in the business. That means there is no need for supervision, as each member will be monitoring the others to make sure the company runs smoothly. For companies owned as an employee cooperative, it is considered that the employees will keep an eye on the other employees to make sure the work gets done and the company is successful.

Advantage: Improved Communication and Performance

The members of a cooperative are involved in the production, management and overall success of the business. This means that they are able to communicate with each other regarding the way the company is operating, as well as make any necessary adjustments in order to improve the performance of the company.

Disadvantage: Risk in Financing

A cooperative runs higher risks when it comes to financing, as the overall organization of the business is shared among several members rather than a single owner. Most cooperatives do not receive favorable financing or loan options, because no one person is responsible for the finances, supervision, or performance of the business.

Disadvantage: Shared Decisions

A cooperative does not have a member or person who makes the decisions for the company. The members of a cooperative must know and share the responsibilities of planning and performance of the cooperative. Members who share a housing cooperative have to share duties, which may include the costs of ownership, maintenance, and decisions about what new members can be allowed in the housing space.

Disadvantage: Working Hours and Financing

A cooperative requires a lot of work from its members. Since members are responsible for the finances, maintenance, and overall production of the company, they tend to work in more than a typical business structure where there are supervisors, managers, and employees. Cooperatives also require financing from each member in order to maintain business. If the business is not benefiting, then the cooperative members will not be able to see the profits or income from their cooperative business.