Section 8 Company
A Section 8 Company in India is a not-for-profit organization that aims at promoting fields relating to commerce, art, science, sports, religion, and so on. It differs from other companies due to the fact that their profit will be used in its objectives rather than distributing among the dividend holders. They can be established as public or a private company and have special status and exemptions of the Indian government. They include NGOs, trusts, societies, foundations, and associations working for a plethora of charitable and social causes.
What is Section 8 Company?
A Section-8 company is integrated with the objective of encouraging commerce, art, science, sports, religion, etc. These companies aim to optimize their income and profits for developing their objectives and prevent the payment of dividends to their participants. A corporation of this kind may be incorporated as a public or private firm. The Indian government provides special status to these companies and excludes them from some requirements applicable to other commercial companies.
Different types of Section 8 Company
Following are the types of the Section 8 Company
NGOs: Deals with environmental, social or human-centered problems through spontaneous donations.
Trusts: As per the trust deeds possessing assets for particular beneficiaries.
Societies: Membership-based firms engaging in donative campaigns.
Foundations: Endowed entities assisting charitable causes.
Associations: Bringing together the individuals with mutual interest or goals.
Benefits of a Section 8 Company
Following are the benefits of a Section 8 Company:
1.Section 8 companies receive tax relief, resulting in lower tax payments and extra funds for charitable operations.
2.The assets of members and directors remained safe from personal liability in case the company faced financial issues.
3.As the Section 8 company is dedicated to social welfare, trust among donors and stakeholders increases.
4.These companies help societies by tackling issues related to poverty, healthcare, and education above profit-making.
5.Section 8 companies can approach funding and grants from different sources to support their projects or campaigns.
6.They can still adjust to changing demands and make judgments that are in the best interests of society even though they have rules to obey.
7.These companies do not have the liability to pay stamp duty on some specific documents, which results in lower registration costs.
Eligibility Criteria for applying Section 8 company
To meet the criteria for registration as a Section 8 company, members or teams must satisfy the following criteria approved by the Central Government:
Purpose: The company must aim to boost particular tasks like education, charity, or environmental safeguards.
Use of Funds: The profits were again reinvested in the operations.
No Dividends: There are no dividends for its members, as the funds are used for its donations and charitable goals.
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Documents Requirements for Section 8 Company
Here is a list of the documents that are required while applying for the Section 8 company:
- Digital Signature Certificate (DSC) for the Directors.
- Director Identification Number (DIN) for every single director.
- Memorandum of Association (MoA) – Drafting the primary and secondary goals of the company.
- Articles of Association (AoA) – This document describes the guidelines and protocols for the management and daily operations.
- Identity and Address evidence of Directors.
- Confirmation of the Registered Office Address.
- The specialist issued a statement verifying the preparation of the MoA and AoA in accordance with the Act’s provisions.
Conclusion
Section 8 companies are those that benefit developing social issues and welfare of society rather than making a profit from it. They enjoy advantages like tax relief, enhanced stakeholders’ trust, and protection of personal liability of members. Such organizations assist education, healthcare, reduction in poverty, and several other activities through their reinvestment of profits for such objectives and hence have a substantial impact on society.
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FAQ’s
It’s wiping your company off the government’s radar, erasing its legal existence like it never happened.
You’ve got NGOs tackling social issues, trusts holding assets for specific beneficiaries, societies running on membership, foundations for charity work, and associations for people with shared interests.
They receive tax breaks, contributors are more likely to trust them, members’ assets are protected from personal responsibility, they address social concerns, they may obtain money from a variety of sources, they can adjust to changing demands, and they pay less for registration because there is no stamp fee.
You need to aim for education, charity, or environmental protection, reinvest profits back into the company, and not pay dividends to members.
You’ll need a Digital Signature Certificate (DSC), Director Identification Number (DIN), Memorandum of Association (MoA), Articles of Association (AoA), ID and address proof of directors, registered office address confirmation, and a specialist’s statement verifying the MoA and AoA.
They pay less tax, so there’s more money for charitable work.
Yep, if the company runs into financial trouble, members’ and directors’ assets are safe from personal liability.
Yes, they can look for funds and cash from different places to help their projects.