CHAPTER 2: FORMS OF BUSINESS OWNERSHIP

A cooperative (co-op) is a business owned and
operated for the benefits of its members.
It is formed to give benefits to its members and
not to earn profits.
It is formed under the Cooperative Ordinance
of Malaysia.
It is a legal entity which is separated from its
members.
Therefore, like corporations, a cooperative can
buy assets, sign contracts, sue and be sued.

ADVANTAGES OF
COOPERATIVE

1.Limited Liability. The members of a cooperative have limited liability. In case
of failure, the creditors can only take the amount of their investments in the
cooperative. Their personal assets cannot be taken away to pay for the
debts.

2.Low taxation. The income tax on the profits of a cooperative is lower than
that of a corporation.

3.Continuity. A cooperative is a legal entity and its continuity does not depend
on the lives of its members. It will continue or go on even if the members
withdraw their investments or pass away.

4.Democratic. Each member is entitled to only one vote in electing the Board of
Directors. Therefore, no member can have a majority vote. No one can
influence the election of directors.

5.Reasonable prices. The cooperatives sell goods at reasonable prices. This is
because they increase the welfare of the members and do not maximize
profits.

DISADVANTAGES OF
COOPERATIVE

1.Low return on investment. Returns on investments for cooperatives are
lower than other types of investment because they are not profit-oriented.

2.Separation of ownership and control. A cooperative is owned by members.
However, it is managed by managers who are paid salaries. The managers
may have different goals and interests in the business.

3.Limited amount of investment. The members can only own a limited number
of shares in a cooperative. Shares cannot be transferred and are not listed
on the stock exchange.

4.Small capital (when compared to corporations). The capital of a
cooperatives are contributed by the members. Many cooperatives have
small capital because they have few members if compared to corporations.
This is because the returns on their investment in cooperatives are low.

CONCLUSION

Selecting a right form of business ownership
is one of the most important decisions
business owners make, with wide implications
for their financial success. The right form
of business ownership affects safety of
personal assets, taxation and smooth
continuation of the business upon ownership
change.

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REFERENCES

n/a Norlida. K, Za’faran. H, Rabiah. A.W.,
Rohaya. M. HPrinciples of Management
n/a Griffin, R. W.,Fundamentals of
Management
n/a C.W. Lamb Hr. J. F. Hair, Jr & Mc
DanielMarketing

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