Advantages & Disadvantages for Co-Ops

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A co-op or cooperative is a business or housing development that is member-owned. These members take the responsibility of voting other members in, though businesses are still publicly traded. If you are thinking of joining or starting a co-op, it is important to consider the advantages and disadvantages before getting started.

Advantage: Shared Costs

  • The entire point of a cooperative is that the members are all responsible for the business and cooperate in running it. One of those items they must cooperate on is sharing the costs of the business or housing development. An artist's studio space can run as a cooperative, where several artists share the rental payment in order to have a larger and better artist's studio. In regards to a business, cooperative members would have to share the expenses of advertising and other expenditures.

Advantage: Equal Monitoring

  • Members of a cooperative are all invested in the company. That means that there is no need for supervision, because each member will be monitoring other members to ensure the company runs smoothly. For companies that are cooperatively owned by their employees, it is thought that employees will monitor other employees to ensure that the job is done and the company succeeds.

Advantage: Enhanced Communication and Performance

  • Members of a cooperative are all involved in the production, management and overall success of the company. This means that members are able to communicate with one another in regards to how the company is running, as well as make the necessary adjustments in order to improve the performance of the company.

Disadvantage: Risk of Financing

  • A cooperative runs higher risks when it comes to financing, because the overall organization of the company is shared amongst several members rather than a sole owner. Most cooperatives will not receive favorable financing or loan options, because there is not one individual responsible for finances, supervision or the company's performance.

Disadvantage: Shared Decisions

  • A cooperative does not have one member or individual making the decisions for the company. Members of a cooperative must meet and share responsibilities for company planning and performance. Members sharing a housing cooperative have to share in duties that can include upkeep of the property, maintenance and decisions on allowing new members into the housing space.

Disadvantage: Hours and Funding

  • A cooperative requires a lot of work on the part of its members. Since members are responsible for finances, upkeep and overall production for the company, they are inclined to work more than a typical business structure where there are supervisors, management and employees. Cooperatives also require funding from each member in order to maintain the business. If the business is not profiting, then the cooperative members will not see returns or income from their cooperative business.

References

  • Photo Credit Jupiterimages/Brand X Pictures/Getty Images
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