Ideal business structure for NGO’s and Non-Profit Organizations
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Section 8 Company
A Section 8 Company is a Company which:
- It is incorporated for the promotion of commerce, art, science, education, research, sports, charity, welfare, religion, protection of atmosphere or any such different object.
- It intends to use all its profits, income, or different earnings, in promoting these objects.
- Pays no dividend or financial gain to its members.
These square measure restricted firms, registered below the businesses Act, and can be treated as restricted firms while not the phrase “limited” value-added to their name. they’ll are registered as non-public restricted or public restricted firms.
Section twenty-five Company (under corporations Act, 1956) could be a previous version. Section eight corporations area unit a legal kind for Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs). a region eight Company has the authority to figure anyplace within the country.
Section 8 Company Registration
The process and necessities of a section8 Company are precisely the same as arranged down for a company. as well as all the rights and obligations that accompany such a company. the sole side wherever the dissent is that a neighborhood eight Company cannot use the words “Section 8” or “Limited” in its name.
- The process of registering a district eight Company is that the same as incorporating AN organization, Trust or Co-operative Society below the businesses Act 2013.
- An additional demand is there of seeking a license from the central government below Section eight of the businesses Act, 2013.
- The license, basically, permits them to delete Private/Public restricted from their name. With this license, the corporate becomes eligible for sure exemptions from provisions of law and have concessions within the fee.
- If the projected Section eight Company has been registered as a personal restricted then a minimum of two promoters area units needed. however, if it’s a public restricted Section eight Company then a minimum of seven promoters should be there.
Benefits of Section 8 Company Registration
Being an associate degree NPO or Non-profit Organization doesn’t mean that the corporate cannot build a profit or financial gain. It solely signifies that the corporate will earn financial gain however the promoters don’t seem to be to learn from those profits. The profits can not be distributed among the promoters. All incomes should be applied to promoting the item.
Still, sure exemptions and edges are provided for an organization or NPO u/s eight of corporations Act 2013. various Tax exemptions also are there for such corporations. Even the donors contributive towards Section eight Company square measure eligible to assert the Tax Exemption against these donations.
Some of the advantages are:
- Distinct Legal Identity: Section eight Company includes a separate legal entity. completely different from its members. Its legal standing is completely different from its members. the corporate includes a perpetual existence. together with having organized operations and larger flexibility.
- Zero Stamp Duty: A Section eight Company is exempt from the need of paying taxation on the ratite bird and AoA of the personal or public company. that is applicable for registration of other forms of company structures.
- No Minimum Capital Requirement: No minimum capital limit has been mentioned for a vicinity eight Company in Bharat. and therefore the capital structure is also altered at any stage as per the expansion necessities of the corporate. this suggests that it may be fashioned with none share capital. The funds necessary for carrying the business operations may be brought, later, within the sort of donations and/or subscriptions from members and therefore the general public.
- Name: Section 8 Company doesn’t get to suffix restricted or non-public restricted, next to its legal name. It is registered with names that pick apart like Association, Society, Council, Club, Charities, Foundation, Academy, Institute, Organisation, and Federation.
- CARO: Requirements of corporations Auditor’s Report Order or CARO don’t apply to the present sort of company.
- Tax Benefits: For Section 8 Companies in India, many tax benefits are granted.
- Credibility: Section eight corporations area unit additional reliable than all alternative kinds of charitable organizations. They are unit|they’re} ruled by the businesses Act and are regulated strictly. like the necessity of a compulsory annual audit, or the flightless bird and AOA can’t be altered at any stage or scenario. the foundations on managing the profits and losses of the corporate create these corporations trustworthily.
- Exemption to the donors: Those donating to section8 Company are eligible for tax exemptions u/s 12A and 80G of the taxation Act.
- Membership: A registered partnership firm will become a member in its individual capability and procure office.