1. A cooperative society is any group found by individuals with common interest who contribute money in form of capital to promote the business interest of members.
  2. A cooperative society is a form of voluntary self-help business organization in which individuals, sole proprietors, traders or producers unite to foster their good and individual business interest.


A cooperative society have the following characteristics:

  1. Democracy each member has only vote regardless of contribution made to the society.
  2. Profit distribution is based on patronage. Any surplus is distributed among members according to the purchase made. i.e amount of goods purchased.
  3. Private ownership: It is owned by private individuals, that is, it is not owned by the government.
  4. Promotion of member’s interest: It is set up by the people with common interest in order to promote their business interest and for the provision of other welfare benefits.
  5. Open and voluntary membership: Any person can be a member thus membership is open to everybody who is interested in becoming a member. There is no restriction of membership.
  6. Perpetual existence: A cooperative society is similar to a limited liability company, as it can exist in perpetuity.
  7. Registered under cooperative law: Most cooperative societies are registered under the cooperative law.
  8. Limited liability: The liability of members is limited to the amount contributed to the society.
  9. Control and managed by the committee: A committee is set up by the members to manage and control the affairs of the society.



  1. Retail cooperative society: This is established and managed by a voluntary group of retailers in order to make goods readily are valuable to members at reduced price. The members pool their resources together in order to purchase in back and then sell the goods at reduced price to members.
  2. Producers cooperative society: This is an association of producers of similar goods who have come together to promote the production, marketing and sales of their product. They enjoy large scale buying of raw materials and equipment at reduced price. Members are taught new techniques of production they combine the factors of production to produce goods at reduced prices.
  3. Wholesalers’ cooperative society: This is made up of wholesalers who pool their resources together to purchase goods in large quantities to the retailers, wholesalers cooperative society buys in bulk at reasonable price from the manufacturers.
  4. Consumer Cooperative society: This is formed by consumers who pool their resources together to enable them buy goods directly from the producer at cheaper price. This form of corporative society deals mostly in consumer goods.
  5. Credit and thrift society: This is a society in which members make contribution to a fund and out of which they apply for loan. The interest changed on the loan is usually very save the problem of getting loan from the bank at higher interest rate.
  6. Multipurpose cooperative society: This is a cooperative movement, which combines all the function of all societies. They engage in different form of ventures that members consider profitable and is of interest to the society and engage in any business that a cooperative can do without changing its law. This ensure greater profitability to the society.



  1. Profit is exempted from tax.
  2. Operation on democratic basis.
  3. Provision of loan facilities to members.
  4. Educating members.
  5. Range scale production.
  6. Low cost advertising.
  7. Encourage joint marketing of products.
  8. Encouragement of savings habit.
  9. Collective use of factors of production.
  10. Pooling of resources for invest.



  1. Misappropriation of fund.
  2. Inefficient management.
  3. Low returns on investment.
  4. Problems in loan recovery.
  5. Insufficient capital.
  6. High level of illiteracy.
  7. Unnecessary government interference



  1. There is stiff competition from low-cost traders.
  2. In the rural areas especially, bad roads and inefficient transport services, or at times the lack of it, make consumer cooperative shops inaccessible to many members.
  3. Retail cooperatives thrive better among Industrial population with high purchasing power but this limited in Nigeria.
  4. Long-scale retail trading needs considerable capital and financing to be successful but capital is short supply in Nigeria.
  5. Members do have financial problems and not every member is in a position to get a loan through the society.
  6. Due to crop failure or an act of good, the harvest may be too poor for the farmer to repay loans and compensate for effort.
  7. Owing to the nature of their business, procedure or farmers.

Cooperative society attract mostly illustrates and school drop-out.

  1. Diversification makes specialization difficult especially for amateur people. They become a jack of all trades and master of more.
  2. Members can use their loans for purpose other than those for which they were obtained.
  3. Loan are hard to refund, especially if the project for which the loan was taken fail to yield returns.



  1. Legal Entity: Both have separate legal personality distinct from their members
  2. Limited Liability: The liability of members is limited to the amount of money contributed by members and shareholders.
  3. Registration: Both are registered before commencement of operations. A company will be registered under company and Allied Matters and a cooperative society under cooperative law.
  4. Annual general meeting: They normally hold annual general meeting to discuss about the organization and to present the financial statements.
  5. Preparation of financial statements: Both are mandated to prepare financial statements and submit to the relevant government agencies.
  6. Distribution of dividends: All members are entitled to dividends.



                     SOCIETY                      COMPANY
1.       The primary aim is to cater for member’s welfare. The primary aim is to maximize profit.


2.       Profit of cooperative is not subject to income tax. Profit is subject to income tax.
3.       Sharing of profit is based on patronage. Profit sharing is based on share-holding.
4.       Members contribute capital of society. Source of finance is from share capital.
5.       It is registered under cooperative laws. It is registered under company and Allied matters.
6.       There is payment of registration fees by members. There is no payment of registration fees by members.


7.       It is controlled and managed by elected committee. Management is by the board of directors.



  1. Explain the advantages of cooperative society
  2. Explain any three types of cooperative society


See also






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