Business Organisation

Meaning
Business organisation refers to all necessary arrangements required to
conduct a business. It refers to all those steps that need to be undertaken for
establishing relationship between men, material, and machinery to carry on
business efficiently for earning profits. This may be called the process of
organising. The arrangement which follows this process of organising is
called a business undertaking or organisation. A business undertaking can be
better understood by analysing its characteristics.
Characteristics
1. Distinct Ownership : The term ownership refers to the right of an
individual or a group of individuals to acquire legal title to assets or
properties for the purpose of running the business. A business firm may be
owned by one individual or a group of individuals jointly.
2. Lawful Business : Every business enterprise must undertake such business
which is lawful, that is, the business must not involve activities which are
illegal.
3. Separate Status and Management : Every business undertaking is an
independent entity. It has its own assets and liabilities. It has its own way
of functioning. The profits earned or losses incurred by one firm cannot be
accounted for by any other firm.
4. Dealing in goods and services : Every business undertaking is engaged
in the production and/or distribution of goods or services in exchange of
money.
5. Continuity of business operations : All business enterprise engage in
operation on a continuous basis. Any unit having just one single operation
or transaction is not a business unit.
6. Risk involvement : Business undertakings are always exposed to risk and
uncertainty. Business is influenced by future conditions which are
unpredictable and uncertain. This makes business decisions risky, thereby
increasing the chances of loss arising out of business.

Forms of Business Organisation

While establishing a business the most important task is to select a proper
form of organisation. This is because the conduct of business, its control,
acquisition of capital, extent of risk, distribution of profit, legal formalities,
etc. all depend on the form of organisation.
The most important forms of business organisation are as follows:
• Sole Proprietorship
• Joint Hindu Family Business
• Partnership
• Joint Stock Company
• Co-operative Society

Sole Proprietorship
Meaning
When the ownership and management of business are in control of one
individual, it is known as sole proprietorship or sole tradership. It is seen
everywhere, in every country, every state, every locality. The shops or stores
which you see in your locality — the grocery store, the vegetable store, the
sweets shop, the chemist shop, the paanwala, the stationery store, the
STD/ISD telephone booths etc. come under sole proprietorship. It is not that
a sole tradership business must be a small one. The volume of activities of
such a business unit may be quite large. However, since it is owned and
managed by one single individual, often the size of business remains small.
Characteristics:
1. Ownership : The business enterprise is owned by one single individual,
that is the individual has got legal title to the assets and properties of the
business. The entire profit arising out of business goes to the sole proprietor.
Similarly, he also bears the entire risk or loss of the firm.
2. Management : The owner of the enterprise is generally the manager of
the business. He has got absolute right to plan for the business and
execute them without any interference from anywhere. He is the sole
decision maker.
3. Source of Capital : The entire capital of the business is provided by the
owner. In addition to his own capital he may raise more funds from outside
through borrowings from close relatives or friends, and through loans from
banks or other financial institutions.
4. Legal Status : The proprietor and the business enterprise are one and the
same in the eyes of law. There is no difference between the business assets
and the private assets of the sole proprietor. The business ceases to exist
in the absence of the owner.
5. Liability : The liability of the sole proprietor is unlimited. This means
that, in case the sole proprietor fails to pay for the business obligations and
debts arising out of business activities, his personal property can be used
to meet those liabilities.
6. Stability : The stability and continuity of the firm depend upon the
capacity,
competence and the life span of the proprietor.
7. Legal Formalities : In the setting up, functioning and dissolution of a sole
proprietorship business no legal formalities are necessary. However, a few
legal restrictions may be there in setting up a particular type of business.
For example, to open a restaurant, the sole proprietor needs a license from
the local municipality ; to open a chemist shop, the individual must have a
license from the government.

Advantages of Sole Proprietorship:

1. Easy Formation: The biggest advantage of a sole tradership business is its
easy formation. Anybody wishing to start such a business can do so in
many cases without any legal formalities.
2. Better Control : The owner has full control over his business. He plans,
organises, co-ordinates the various activities. Since he has all authority,
there is always effective control.
3. Prompt Decision Making : As the sole trader takes all the decisions
himself the decision making becomes quick, which enables the owner to
take care of available opportunities immediately and provide immediate
solutions to problems.
4. Flexibility in Operations : One man ownership and control makes it
possible for change in operations to be brought about as and when
necessary.
5. Retention of Business Secrets : Another important advantage of a
sole proprietorship business is that the owner is in a position to maintain
absolute secrecy regarding his business activities.
6. Direct Motivation : The owner is directly motivated to put his best
efforts as he alone is the beneficiary of the profits earned.
7. Personal Attention to Consumer Needs : In a sole tradership business,
one generally finds the proprietor taking personal care of consumer needs
as he normally functions within a small geographical area.
8. Creation of Employment : A sole tradership business facilitates
selfemployment
and also employment for many others. It promotes
entrepreneurial skill among the individuals.
9. Social Benefits : A sole proprietor is the master of his own business. He
has absolute freedom in taking decisions, using his skill and capability.
This gives him high self-esteem and dignity in the society and gradually he
acquires several social virtues like self- reliance, self-determination,
independent thought and action, initiative, hard work etc,. Thus, he sets an
example for others to follow.
10. Equitable Distribution of Wealth : A sole proprietorship business is
generally a small scale business. Hence there is opportunity for many
individuals to own and manage small business units. This enables
widespread dispersion of economic wealth and diffuses concentration of
business in the hands of a few.

Disadvantages of Sole Proprietorship :

1. Unlimited Liability : In sole proprietorship, the liability of business is
recovered from the personal assets of the owner. It restricts the sole
trader to take more risk and increases the volume of his business.
2. Limited Financial Resources : The ability to raise and borrow money
by one individual is always limited. The inadequacy of finance is a major
handicap for the growth of sole proprietorship.
3. Limited Capacity of Individual : An individual has limited knowledge
and skill. Thus his capacity to undertake responsibilities, his capacity to
manage, to take decisions and to bear the risks of business are also
limited.
4. Uncertainty of duration : The existence of a sole tradership business is
linked with the life of the proprietor. Illness, death or insolvency of the
owner brings an end to the business. The continuity of business operation
is, therefore, uncertain.

Suitability of Sole Proprietorship :

Sole proprietorship business is suitable where the market is limited,
localised and where customers give importance to personal attention. This
form of organisationis suitable where the nature of business is simple and
requires quick decision. For business where capital required is small and risk
involvement is not heavy, this type of firm is suitable. It is also considered
suitable for the production of goods which involve manual skill e.g.
handicrafts, filigree works, jewellery, tailoring,haircutting,etc.

Joint Hindu Family Business

Meaning
The Joint Hindu Family (JHF) business is a form of business organisation
found only in India. In this form of business, all the members of a Hindu
undivided family own the business jointly. The affairs of business are
managed by the head of the family, who is known as the “KARTA” .
A Joint Hindu Family business comes into existence as per the Hindu
Inheritance Laws of India. In a joint Hindu family business only the male
members get a share in the business by virtue of their being part of the
family. The membership is limited up to three successive generations. Thus,
an individual, his sons(s), and his grandson(s) become the members of a
Joint Hindu Family by birth. They are also called “Co-parceners”. The term
co-parceners implies that such an individual has got the right to ask for a
partition of the Joint Hindu Family business and to have his separate share.
A daughter has no right to ask for a partition and is, therefore, not a co-
parcener.

Characteristics :
1. Legal Status : The Joint Hindu Family business is a jointly owned
business just like a jointly owned property. It is governed by Hindu Law. It
can enter into partnership agreement with others.
2. Membership : There is no membership other than the members of the
joint family. Inside the family also, it is restricted only to male members
who are co-parceners by birth.
3. Profit Sharing : All co-parceners have equal share in the profits of the
business. In the event of death of any of the co-parcener, his wife can
claim share of profit.
4. Management : The management of a joint Hindu family business is in the
hands of the senior-most family member who is known as the karta. He
has the authority to manage the business and his ways of managing can
not be questioned by the co-parceners.
5. Liability : The liability of each member of the Joint Hindu Family
business is limited to the extent of his share in the business. But the liability
of the karta is unlimited as, it extends to his personal property.
6. Fluctuating Share : The individual share of each co-parcener keeps on
fluctuating. This is because, every birth of a male child in the family adds
to the number of co-parceners and every death of a co-parcener reduces
the number.
7. Continuity : A Joint Hindu Family business continues to exist on the
death of any co-parcener. Even on the death of the karta, it continues to
exist as the next seniormost family member becomes karta. However, a
Joint Hindu Family business can be dissolved any time either through
mutual agreement between members or by partition.
Advantages of Joint Hindu Family Business :
1. Assured share in profits : Every co-parcener is assured a share in the
profits irrespective of his contribution to the successful running of the
business. This , in a way safeguards the interests of some members of the
family like minors, sick, disabled and widows.
2. Freedom in managing : The karta enjoys full freedom in conducting the
family business. It enables him to take quick decisions without much
interference.
3. Sharing of knowledge and experience : A Joint Hindu Family business
provides opportunity for the young members of the family to get the benefit
of knowledge and experience of the elder members and also helps in
inculcating virtues like discipline, self-sacrifice, tolerance etc.
4. Unlimited liability of the karta : The liability of the co-parceners is
limited, except for that of the karta. This makes the karta to manage the
business in the most efficient manner.
5. Continued existence : A Joint Hindu Family business is not affected by
the insolvency or death of any member including that of karta. Thus it can
continue for a long period of time.
Disadvantages of Joint Hindu Family Business :
1. Limited resources : Joint Hindu Family business has generally limited
financial and managerial resource. Therefore, it can not undertake big and
risky business.
2. Lack of motivation : There is always a lack of motivation among the
members to work hard. It is because the benefit of hard work does not
go entirely to any individual member but shared by all the co-parceners.
3. Scope for misuse of power by the karta : Since the karta has absolute
freedom to manage the business, there is scope for him to misuse it for his
personal gains. An inefficient karta can also do harm to the business.
4. Scope for conflict : In a Joint Hindu Family business the male members
of three successive generations are involved. It always leads to conflict
between generations.
5. Instability : The continuity of business is always under threat. It may be
due to a small rift within the family and if a co-parcener ask for a partition
the business is closed.
Suitability of Joint Hindu Family Business:
The success of Joint Hindu Family business is mostly dependent upon the
efficiency of the karta and the mutual understanding between the co-
parceners. Nevertheless, this type of business is losing its ground with the
gradual decline in the joint Hindu family system.
Partnership
Meaning
A partnership form of organisation is one where two or more persons are
associated to run a business with a view to earn profit. Persons from similar
background or persons of different ability and skills, may join together to
carryon a business. Each member of such a group is individually known as
‘partner’and collectively the members are known as a ‘partnership firm’.
These firms are governed by the Indian Partnership Act, 1932.

Characteristics:
1. Number of Partners : A minimum of two persons are required to start a
partnership business. The maximum membership limit is 10 in case of
banking business and 20 in case of all other types of business.
2. Contractual Relationship : The relation between the partners of a
partnership firm is created by contract. The partners enter into partnership
through an agreement which may be verbal, written or implied. If the
agreement is in writing it is known as a ‘Partnership Deed’.
3. Competence of Partners : Since individuals have to enter into a contract
to become partners, they must be competent enough to do so. Thus, minors,
lunatics and insolvent persons are not eligible to become partners. However,
a minor can be admitted to the benefits of partnership i.e. he can have a
share in the profits.
4. Sharing of Profit and Loss : The partners can share profit in any ratio
as agreed. In the absence of an agreement, they share it equally.
5. Unlimited Liability : The partners have unlimited liability. They are liable
jointly and severally for the debts and obligations of the firm. Creditors can
lay claim on the personal properties of any individual partner or all the
partners jointly. Even a single partner may be called upon to pay the debts
of the firm. Of course, he can get back the money due from other partners.
The liability of a minor is, however, limited to the extent of his share in the
profits, in case of dissolution of a firm.
6. Principal-Agent Relationship : The business in a partnership firm may be
carried on by all the partners or any one of them acting for all. This means
that every partner is an agent when he is acting on behalf of others and he
is a principal when others act on his behalf. It is, therefore, essential that
there should be mutual trust and faith among the partners in the interest of
the firm.
7. Transfer of Interest : No partner can sell or transfer his interest in the
firm to anyone without the consent of other partners.
8. Legal Status : A partnership firm is just a name for the business as a
whole. The firm means partners and the partners mean the firm. Law
does not recognise the firm as a separate entity distinct from the partners.
9. Voluntary Registration : Registration of partnership is not compulsory.
But since registration entitles the firm to several benefits, it is considered
desirable. For example, if it is registered, any partner can file a case against
other partners, or a firm can file a suit against outsiders in case of
disputes, claims, disagreements, etc.
10. Dissolution of Partnership : Dissolution of partnership implies not only
a complete closure or termination of partnership business, but it also
includesany change in the existing agreement among the partners due to a
change in the number of partners.

Advantages of Partnership Firm :

1. Easy Formation : A partnership can be formed without many legal
formality and expenses. Every partnership firm need not be registered.
2. Larger Resources : As compared to sole proprietorship, a partnership
firm can pool larger financial resources. Thus it can enter into bigger
operations and can have more credit facilities. It can also have better
managerial talent.
3. Flexibility in operation : There is flexibility of operation in partnership
business due to a limited number of partners. These partners can change
their operations and amend objectives if necessary by mutual consent.
4. Better Management : Partners take more interest in the affairs of business
as there is a direct relationship between ownership, control and profit.
They often meet to discuss the affairs of business and can take prompt
decision.
5. Sharing of Risk: In partnership, risk of loss is easier to bear by individual
partners as it is shared by all the partners.
6. Protection of minority interest : Every partner has an equal say in
decision making. A partner can prevent a decision being taken if it adversely
affects his interests. In extreme cases a dissenting partner may withdraw
from partnership and can dissolve it.
7. Better Public Relations : In a partnership firm the group managing the
affairs of the firm is generally small. It facilitates cordial relationship with
the public.
Disadvantages of partnership Firm :
1. Instability : A partnership firm does not continue to exist indefinitely. The
death, insolvency or lunacy of a partner may bring about an unexpected
end to partnership.
2. Unlimited Liability : As the liability of partners is joint and several to
an unlimited extent, any one of the partners can be called upon to pay all the
debts even from his personal properties. Further, as every
partner has a right to take part in the management of the firm, any wrong
decision by a single partner may lead to heavy liabilities for others.
3. Lack of Harmony : Since every partner has equal right, there are greater
possibilities of friction and quarrel among the partners. Differences of
opinion may lead to mistrust and disharmony which may ultimately result in
disruption and closure of the firm.
4. Limited Capital : As there is a restriction on the maximum number of
partners, the capital which can be raised is limited.
Suitability of Partnership Firm:
In a partnership firm, persons from different walks of life having ability,
managerial talent and skill join together to carry on a business. This
increases the administrative strength of the organisation, the financial
resources, the skill and expertise, and reduce risk. Such firms are most
suitable for comparatively small business such as retail and wholesale trade,
professional services, medium sized mercantile houses and small
manufacturing units. Generally it is seen that many organisations are
initially started as partnership firms and later, when it is economically viable
and financially attractive for the investors, it is converted into a company.

Joint Stock Company

Meaning:
A Joint Stock Company form of business organisation is a voluntary
association of persons to carry on business. Normally, it is given a legal
status and is subject to certain legal regulations. It is an association of
persons who generally contribute money for some common purpose. The
money so contributed is the capital of the company. The persons who
contribute capital are its members. The proportion of capital to which each
member is entitled is called his share, therefore members of a joint stock
company are known as shareholders and the capital of the company is
known as share capital. The total share capital is divided into a number of
units known as ‘shares’. You may have heard of the names of joint
stock companies like Tata Iron & Steel Co. Limited, Hindustan Lever
Limited, Reliance Industries Limited, Steel Authority of India Limited,
Ponds India Limited etc.
The companies are governed by the Indian Companies Act, 1956. The Act
defines a company as an artificial person created by law, having separate
entity, with perpetual succession and a common seal.
Characteristics:
1. Artificial Person : A Joint Stock Company is an artificial person in the
sense that it is created by law and does not possess physical attributes of
a natural person. However, it has a legal status.
2. Separate Legal Entity : Being an artificial person, a company has an
existence independent of its members. It can own property, enter into
contract and conduct any lawful business in its own name. It can sue and
can be sued in the court of law. A shareholder cannot be held responsible
for the acts of the company.
3. Common Seal : Every company has a common seal by which it is
represented while dealing with outsiders. Any document with the common
seal and duly signed by an officer of the company is binding on the
company.
4. Perpetual Existence : A company once formed continues to exist as long
as it fulfils the requirements of law. It is not affected by the death, lunacy,
insolvency or retirement of any of its members.
5. Limited Liability : The liability of a member of a Joint Stock Company
is limited by guarantee or the shares he owns. In other words, in case of
payment of debts by the company, a shareholder is held liable only to the
extent of his share.
6. Transferability of Shares : The members of a company are free to
transfer the shares held by them to anyone else.
7. Formation : A company comes into existence only when it has been
registered after completing the formalities prescribed under the Indian
Companies Act 1956. A company is formed by the initiative of a group of
persons known as promoters.
8. Membership : A company having a minimum membership of two persons
and maximum fifty is known as a Private Limited Company. But in case
of a Public Limited Company, the minimum is seven and the maximum
membership is unlimited.
9. Management : Joint Stock Companies have democratic management and
control. Even though the shareholders are the owners of the company, all
of the them cannot participate in the management process. The company is
managed by the elected representatives of shareholders known as Directors.
10. Capital : A Joint Stock Company generally raises a large amount of
capital through issue of shares.
Advantages of Joint Stock Company:
1. Limited Liability : In a Joint Stock Company the liability of its members
is limited to the extent of shares held by them. This attracts a large number
of small investors to invest in the company. It helps the company to raise
huge capital. Because of limited liability, a company is also able to take
larger risks.
2. Continuity of existence : A company is an artificial person created by
law and possesses independent legal status. It is not affected by the death,
insolvency etc. of its members. Thus it has a perpetual existence.
3. Benefits of large scale operation : It is only the company form of
organisation which can provide capital for large scale operations. It results
in large scale production consequently leading to increase in efficiency and
reduction in the cost of operation. It further opens the scope for expansion.
4. Professional Management : Companies, because of complex nature
of activities and operations and large volume of business, require
professional managers at every level of organisation. And because of their
financial strength they can afford to appoint such managers. This leads to
efficiency.
5. Social Benefit : A joint stock company offers employment to a large
number of people. It facilitates promotion of various ancillary industries,
trade and auxiliaries to trade. Sometimes it also donates money for
education, health, community service and renders help to charitable and
social institutions.
6. Research and Development : A company generally invests a lot of
money on research and development for improved processes of production,
designing and innovating new products, improving quality of product, new
ways of training its staff, etc.
Disadvantages of Joint Stock Company:
1. Formation is not easy: The formation of a company involves compliance
with a number of legal formalities under the companies Act and compliance
with several other Laws.
2. Control by a Group: Companies are controlled by a group of persons
known as the Board of Directors. This may be due to lack of interest
on the part of the shareholders who are widely dispersed; ignorance,
indifference and lack of proper and timely information. Thus, the democratic
virtues of a company do not really exist in practice.
3. Speculation and Manipulation : The shares of a company are purchased
and sold in the stock exchanges. The value or price of a share is determined
in terms of the dividend expected and the reputation of the company.
These can be manipulated. Besides there is excessive speculation which is
regarded as a social evil.
4. Excessive government control : A company is expected to comply with
the provisions of several Acts. Non-compliance of these invites heavy
penalty. This affects the smooth functioning of the companies.
5. Delay in Policy Decisions : A company has to fulfill certain procedural
formalities before making a policy decision. These formalities are time
consuming and, therefore, policy decisions may be delayed.
6. Social abuses : A joint stock company is a large scale business
organisation
having huge resources. This provides a lot of power to them. Any misuse
of such power creates unhealthy conditions in the society e.g. having
monopoly of a particular business, industry or product; influencing
politicians
and government in getting their work done; exploiting workers, consumers
and investors.

Suitability of Joint Stock Company:

A joint stock company is suitable where the volume of business is quite
large, the area of operation is widespread, the risk involved is heavy and
there is a need forhuge financial resources and manpower. It is also preferred
when there is need forprofessional management and flexibility of operations.
In certain businesses like banking and insurance, business can only be
undertaken by joint stock companies.

Co-operative Society
Meaning
Any ten persons can form a co-operative society. It functions under the
Cooperative Societies Act, 1912 and other State Co-operative Societies
Acts.
A co-operative society is entirely different from all other forms of
organization discussed obove in terms of its objective. The co-operatives are
formed primarily to render services to its members. Generally it also
provides some service to the society. The main objectives of co-operative
society are: (a) rendering service rather than earning profit, (b) mutual help
instead of competition, and (c) self help in place of dependence. On the basis
of objectives, various types of co-operatives are formed :
a. Consumer co-operatives : These are formed to protect the interests of
ordinary consumers of society by making consumer goods available at
reasonable prices. Kendriya Bhandar in Delhi, Alaka in Bhubaneswar and
similar others are all examples of consumer co-operatives
b. Producers co-operatives : These societies are set up to benefit small
producers who face problems in collecting inputs and marketing their
products. The Weavers co-operative society, the Handloom owners
cooperative society are examples of such co-operatives.
c. Marketing co-operatives : These are formed by producers and
manufactures to eliminate exploitation by the middlemen while marketing
their product. Kashmir Arts Emporium, J&K Handicrafts, Utkalika etc.
are examples of marketing co-operatives.
d. Housing Co-operatives : These are formed to provide housing facilities
to its members. They are called co-operative group housing societies.
e. Credit Co-operatives : These societies are formed to provide financial
help to its members. The rural credit societies, the credit and thrift societies,
the urban co-operative banks etc. come under this category.
f. Forming Co-operatives : These are formed by small farmers to carry on
work jointly and thereby share the benefits of large scale farming.
Besides these types, other co-operatives can be formed with the objective of
providing different benefits to its members, like the construction co-
operatives, transport co-operatives, co-operatives to provide education etc.

Characteristics:
1. Voluntary association : Individuals having common interest can come
together to form a co-operative society. Any person can become a member
of such an organisation and leave the same.
2. Membership : The minimum membership required to form a co-operative
society is ten and the maximum number is unlimited. At times the
cooperatives after their formation fix a maximum membership limit.
3. Body corporate : Registration of a society under the Co-operative
SocietiesAct is a must. Once it is registered, it becomes a body corporate
and
enjoys certain privileges just like a joint stock company. Some of the
privileges are:
(a) The society enjoys perpetual succession.
(b) It has its own common seal.
(c) It can own property in its name.
(d) It can enter into contract with others.
(e) It can sue others in court of law.
4. Service Motive : The primary objective of any co-operative organisation
is to render services to its members in particular and to the society in
general.
5. Democratic Set up : Every member has a right to take part in the
management of the society. Each member has one vote. Generally the
members elect a committee known as the Executive Committee to look
after the day to day administration and the said committee is responsible
to the general body of members.
6. Sources of Finances : A co-operative organisation starts with a fund
contribute by its members in the form of units called shares. It can also
raise loans and secure grants from the government easily. One fourth of the
profits of the co-operative are transferred to its fund every year.
7. Return on capital : The return on capital subscribed by the members is
in the form of a fixed rate of dividend after deduction from the profit.
Advantages of Co-operative Society:
1. Easy Formation : Formation of a co-operative society is easy as compared
to a company. Any 10 persons can voluntarily form an association and get
themselves registered with the Registrar of Co-operative societies.
2. Limited Liability : The liability of the members is limited to the extent of
capital contributed by them.
3. Open Membership : There is no restriction on any individual to be a
member of any co-operative.
4. State Assistance : Co-operatives get a lot of patronage in the form of
exemptions and concessions in taxes and financial assistance from the
state governments which no other organisation gets.
5. Middleman’s Profit Eliminated : Through the co-operative the consumers
control their own supplies and by this means the middleman’s profit is
eliminated.
6. Management : A co-operative functions in a democratic manner. Each
member has only one vote.
7. Winding up : The dissolution of a co-operative firm is quite difficult. It
does not cease to exist in case of death, or insolvency or resignation of
a member. It has thus a fairly stable life.
Disadvantages of Co-operatives :
1. Limited Capital : The amount of capital that a co-operative can generate
is limited because of the membership remaining confined to a locality or
region or a particular section of people.
2. Problems in Management : Generally it is seen that co-operative do not
function efficiently due to lack of managerial talent.
3. Lack of Motivation : Co-operatives are formed to render service to its
members than to earn profit. This does not provide enough motivation to
manage the co-operatives effectively.
4. Lack of Co-operation : Co-operatives are formed with the very idea of
co-operation. But, it is often seen that there is lot of friction and bickering
among the members due to personality differences, ego clash etc.
5. Lack of Secrecy : Maintenance of business secrecy is one of the important
factors for the success of enterprise which the co-operatives always lack.
6. Dependence on Government : The inadequacy of capital and various
other limitations make co-operatives dependant on the government for
support and patronage in terms of grants, loans and subject themselves to
interference.
Suitability of Co-operatives :
When the purpose of business is to provide service than to earn profit and
to promote common economic interest, the co-operative society is the only
alternative. Co-operatives are also preferred as it is easier to raise capital
through assistance from financial institutions and government. Generally it
seems that a co-operative society is suitable for small and medium size
operations. However, the large sized ‘IFFCO’ [Indian Farmers and
Fertilisers Cooperative and the Kaira Co-operative Processing Milk under
the brand name ‘AMUL’ are the illustrious exceptions.