A co-operative society is defined as a voluntary business organisation in which a group of individuals with common interest pool their resources together to promote the economic welfare of their members in production, distribution and consumption of goods and services.

Co-operative society is one of the oldest forms of business organisation. As far back as 1808, Robert Owen (1771 – 1858) established the first producer co-operative society in New Lonark, England. Also in 1844, Rochdole in collaboration with a group of twenty-eight weavers established a retail co-operative society. In Nigeria, the first producer co-operative society was established in 1922 by a group of cocoa farmers, their objective was to get a reasonable price for their products.

Today, co-operative societies can be found in virtually all commercial activities.

It has really contributed to the development of the Nigerian economy by increasing the standard of living of the people.



  1. Formation: Co-operative societies are formed by two or more persons but there is no stipulated maximum number of persons.
  2. Ownership: Co-operative societies are owned by people with common interest. This makes ownership to be restricted as some conditions must be met before one becomes a member. Objective: The aim and objective of the society is to promote and advance the interest of their members, by rendering services to them.
  3. Management: The control and management of the society is vested in an elected committee whose members must be members of the society.
  4. Capital: The capital is raised through voluntary contributions from the members.
  5. Perpetual Existence: There is continuity in Co-operative societies. Death or withdrawal of a member cannot bring the organisation to an end.
  6. Registered as a limited liability: The liability is limited to the shares held by individual shareholders.
  7. Profit is shared based on patronage: Surplus (profit) for the year is shared among the members on the basis of their patronage during the year.
  8. Democratic in nature: The activities of co-operative society are democratic in nature. Each member is entitled to one vote, irrespective of the number of shares held.



  1. Producers co-operative society: Producers co-operative society is formed by producers of similar products who organise co-operative production and undertake joint marketing of their products on wholesale or retail basis. They share useful information among members. The farmers, for example, can also purchase farm implements such as hoes, cutlasses, seeds and fertilisers in large quantities and sell to members at reduced prices.
  2. Consumers co-operative society: Consumers co-operative society is owned and operated by a group of ultimate consumers who pool their resources together to purchase goods and services in large quantities and distribute them mainly to its members. The operating policies used are open membership, democratic control, limited interest paid on capital invested, proportinate dividend based on their level of purchases or patronage.
  3. Wholesale co-operative society: Wholesale co-operative society is formed by small scale wholesalers who purchase goods in bulk from the manufacturers at reasonable prices and sell in small quantities to retail co-operatives. They are able to raise large sums of money to finance wholesale purchases when they come together. As an entity, they have better bargaining power to purchase in bulk from the manufacturers.
  4. Retail – co-operative society: Retail co-operative society is a contractual organisation formed by many small and
  5. independent retailers. They pool their resources together to enable them buy in bulk and then sell their goods at lower prices to members who receive some form of patronage returns based on the amount of goods they purchased.
  6. Credit and thrift society: Credit and thrift society is an organisation of low income earners who jointly pool large resources or fund together by contributing on a weekly or monthly basis. This type of society encourages saving habits among their members and grant loansto the members out of the accumulated fund. The loan attracts a low rate of interest. At the end of the year, surplus in the form of accrued profits are distributed to members as dividend. The members can also afford the opportunity of purchasing household needs like television, fridge, video camera and chairs.
  7. Multipurpose co-operative society: Multi-purpose co-operative society is a society formed by existing co-operative societies. Multi-purpose co-operative societies undertake any form of cooperative activity that is profitable to the society. This association also serves as a protective body for its members. The society makes facilities used for cooperatives available for sharing among members. They also mediate in case of rift among members.



  1. Encouragement of savings: Cooperative societies encourage saving habits among their members.
  2. Financial assistance: They can mobilise funds needed for business investment and expansion and render financial assistance or give loans to members.
  3. Improve members’ standard of living: They improve the standard of living of their members by providing goods when they cannot buy on their own e.g. electronics and land.
  4. Loan facilities from banks or government: Co-operative societies can obtain loan easily from the bank e.g. Co-operative Banks. They can also receive financial assistance from the government.
  5. Democratic in nature: Each member of the society has equal say in the organisation. Members are entitled to one-man-one-vote right, irrespective of shares held.
  6. Lower prices: Co-operative societies usually buy goods in bulk from the manufacturers at cheaper prices and this enables members to get these goods also at lower prices.
  7. Marketing of members’ products: They assist their members in marketing their products there by ensuring fair prices for the products.
  8. Elimination of middlemen: The activities of co-operative societies help to eliminate the existence of middlemen (i.e. wholesalers and retailers) whose profits would have added to the ultimate cost of the goods.
  9. Prevention of exploitation: Cooperative societies, especially the consumers’ co-operatives, assist to make sure that the final consumers(members) are protected.
  10. Encouragement of hard work: Cooperative society members are always encouraged to work very hard because of joint ownership of the organization
  11. Strong inter-personal relationship: In co-operative societies, there is a strong of joint ownership of the organisation.
  12. Strong inter-personal relationship: In co-operative societies, there is a strong inter-personal relationship among members as they often regard themselves as one.
  13. Education of their members: Cooperative societies do train their members in the area of production, distribution, buying and selling of goods and services.



  1. Insufficient capital: There is lack of adequate capital to run the society. They rely heavily on members contributions which may not be enough.
  2. Inefficient management: The committee in charge of administration usually consists of people who are not specialists and are part-time managers, hence the society may not be effectively and efficiently managed.
  3. High rate of embezzlement: Most of the leaders in co-operative societies are highly corrupt; some often embark on embezzlement and misuse of funds belonging to the societies.
  4. Problem of loan recovery: The society may not be able to recover loans given to – members’, this may destabilize the society. Recovery is difficult and in some cases even impossible.
  5. High level of illiteracy: Majority of the members of co-operative societies are illiterate and such people are not able to make positive contribution to the growth of the society.
  6. Lack of initiative: There is usually lack of individual initiative as the society confers on every one equal right and opportunities.
  7. Evasion of tax: Most of the net profits of Co-operative Societies are not taxedrather they share it among themselves.
  8. Limited expansion: Co-operative societies in most cases cannot expand due to limited capital available to them.
  9. Lack of discipline: Most members are not disciplined as they are often involved in activities capable of causing disunity among members.
  10. Government intervention: Government can interfere by some forms of control on co-operative societies and this tends to slow down the pace of growth of the societies.





  1. Both are legal entities.
  2. Members buy shares.
  3. They hold Annual General Meeting (AGM).
  4. Both are registered.
  5. The shareholders receive dividend.



Co-operative Society

  1. Formation: May only be registered under co-operative laws.
  2. Management: Elected committee manages the affairs of the society.
  3. Registration Distribution: Members pay registration fee apart from the shares.
  4. Profit: Surplus is divided on patronage basis.
  5. Aim: To promote members’ welfare.
  6. Right of Members: Members have equal voting rights.


Limited Liability Company

  1. Formation: Must be registered and incorporated under the Company Act.
  2. Management: The shareholders elect board of directors.
  3. Registration Distribution: Registration fees are not paid after paying fully for the shares held.
  4. Profit: Surplus is divided in proportion to shareholding.
  5. Aim: To make profit.
  6. Right of Members: Members have controlling power on the basis of their shares.

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