Ideal business structure for NGO’s and Non Profit Organizations
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A Section 8 company is such a company that intends to incorporate for the advancement of commerce, art, science, education, research, sports, charity, social welfare, religion, protection of the environment, and further, other elements like these. This company has set to implement all its gained profits, income, or other earnings in developing these elements. Moreover, it does not pay any dividend or income to its members.
Section 8 company is a limited company which does not utilize the phrase "Limited" around its name. It has to be registered under the Companies Act. It can either be registered as a private limited company or a public limited company with the Section 8 Company registration cost. In a prior version under the Companies Act, 1956, it is known as a Section 25 Company. Whereas, for Non-Profit Organizations (NPOs) or Non-Governmental organizations (NGOs), the legal form is the Section 8 Company. After your company gets done with Section 8 Company registration online, it will have the authorization to operate anywhere in the country.
Section 8 company registration procedure has the same process and requirements are the same as setting up for a limited company, while having certain Section 8 Company registration cost . It also incorporates all the powers and obligations that come up after registering for a limited company. The only difference is in the name as Section 8 companies cannot use the "Limited" word in its name.
- The registering process of Section 8 Company will be the same as incorporating an NGO, Trust, or Co-operative Society under the Companies Act 2013.
- You will additionally require a license from the central government under Section 8 of the Companies Act, 2013.
- The license, essentially, authorizes Section 8 Companies to remove Private/Public Limited from their name. The company becomes qualified for certain exemptions from provisions of law and for concessions in the fee after getting a license.
Here's How It Works
Section 8 Company or a Non-Profit organisation (NPO) is a Company established for promoting commerce, art, science, religion, sports, education, research activities, charity or any other useful social object, provided the profits and donations is applied for promoting only the objects of the company and no dividend is paid to its members or owners. The term No Profit does not mean that the Company cannot generate profit or income, but what it means is applying the income for promotion of the object and not for distributing it to the promoters. It means that the Company can earn profits but the promoters cannot be benefitted out of those profits.
- Many privileges and exclusions are possible to section 8 companies under Company Law.
- Non-application of Companies Auditor's Report Order (CARO) is there.
- Exemption from the provision of Minimum Paid-up capital is available.
- A registered partnership firm can be a member of its capacity
- The exemption of Stamp duty for registration is there.
- There are tax deductions to the donors of the Company u/s. 80G of the Income Tax
- Minimum 2 Shareholders (for Private Limited NGO) and 7 Shareholders (for Public Limited NGO) are required.
- DIN (Director Identification Number) for all the Directors is needed.
- Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.) must be there.
- DSC (Digital Signature Certificate) for all of the Directors is needed
- The directors and shareholders can be identical individuals.
- Address proof for the proposed office address must be there.
- DIN for 2 Directors
- MOA + AOA
- Customized Incorporation Master File
- Bank Account Opening Document Support
- Digital Signature for one Director
- Incorporation Certificate
- Company PAN Card
- Domain Name + Web Hosting
- Company Name Approval
- New Incorporation Kit
- Company TAN/TDS Number
- More than 10 Email-Ids for one year
Section 8 Companies do not have the authorization to raise capitals utilizing deposits They can rather acquire donations from the common public. Mentioned below are some of the approaches through which Section 8 Companies can raise funding:
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Foreign Donations
If FCRA (Foreign Contribution Regulation Act 1976) registration has taken place then only, foreign donations are accepted. You can apply for an FCRA license only after 3-years from the date of registration. However, if there is some urgency and you are required to get foreign donations, then you will be needed to take the prior permission from the commissioner.
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Equity Funding
Section 8 Companies are also allowed to raise funds by issuing new equity shares at a higher value.
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Domestic donations
The company can accept domestic donations without any limitation. And for avoiding money laundering cases, you must possess a proper system to keep them checking frequently.