How to register a non profit company?
A Section 8 company, also known as a not-for-profit company, is a popular choice among individuals and organizations looking to promote social welfare. These companies are incorporated under the Companies Act, 2013, and are primarily formed for charitable, educational, religious, or scientific purposes. By registering a Section 8 company, entrepreneurs can contribute to social welfare while enjoying tax exemptions and various other benefits. In this article, we will guide you through the process of registering a Section 8 company in India and discuss its advantages.
If you intend to undertake a non for profit activity for social welfare or social cause, a Section 8 NGO Company is the most suitable legal structure for you. It is widely regarded as an NGO/NPO non governmental organization/ non profit organization. It attracts donations for social causes.
You can start NGOs in India by obtaining registration under any of the following categories:
- Society- under Societies Registration Act-(Central government)
- Trust -under Indian Trusts Act-(State government)
- Company name approval.
- Section 8 Company -under Companies Act-(central government)
A Non-profit company is known as a section 8 company, and it has various advantages compared to a trust or society, like improved recognition and better legal standing. Section 8 companies also have higher credibility amongst donors, international organizations, government departments, and other stakeholders.
Purpose of NGO – Section 8 company
The main purpose of establishing a section 8 company is to promote non-profit/ charitable activities such as commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any other object. The profits and income of the company are applied towards promoting the objectives of the company and are not allowed to distribute dividends to its shareholders.
The incorporation process of a section 8 company is similar to that of a private limited company registration. However, there is an additional requirement of obtaining an NGO license from ROC under section 8 of the companies act, 2013.
A Section 8 company is registered in 5 easy steps.
- Procure digital signature of directors
- Obtain DIN number of subscribers/directors
- Company name approval
- Obtaining NGO license
- Incorporation certificate
Features of Section 8 Company
- Name: Section 8 companies can be registered as business names followed by association, foundation, society, council, club, charities, institute, academy, organization, federation, chamber of commerce, development and more.
For example: Vareen marine foundation
- Profits: In a Section 8 company, the profits can be used only for the charitable/ non profit purposes mentioned in the MOA. All income and profits, if any, should be utilized to promote the objectives of the company. It is not allowed to distribute profits or assets to its members.
- Management: Trusts are managed by trustees as per a trust deed. However, a Section 8 company does not have the concept of trustees. Section 8 companies are managed by the board of directors based on the MOA and AOA draft of the section 8 company.
- Transferability: The control and ownership of a section 8 company can be easily transferred from one person to another.
- No Minimum Capital: There is no requirement for a minimum paid-up capital in the case of a section 8 company registration.
Tax applicability
There is a general misconception that non -profit companies need not have to pay tax as they work for the public welfare or social cause. But this is not true. A non -profit company, like any other legal entity, is liable to pay tax
In order to get tax exemption, a non -profit company can acquire a 12A certificate from the Income Tax Department.
Upon acquiring a 12A certificate, a non -profit company is exempted from paying income tax for the entire lifetime on its surplus income. Act.
Whereas the 80G certificate allows donors( an individual or an entity) making donations to an 80G certified non -profit company to avail deduction. Thus, such a deduction can be claimed by the donors under section 80G of the Income Tax Act.
Minimum requirement for section 8 company registration
- Unique name: To register a section 8 company, you must have a unique name for the proposed company.
- Directors: Company must have at least 2 natural persons appointed as directors, age must be above 18 years and at least 1 director must be a resident of India for at least 182 days in the previous financial year.
- Shareholders: There must be at least 2 shareholders; they can be a natural person or be an entity (a Pvt. Ltd., public limited, HUF, LLP, or section 8 company). It is common in new section 8 company registration for directors to also be shareholders. The percentage of shareholding must be defined.
- Company objects: To start a section 8 company, you must define the nature of business, range of business activities that the company will undertake.
- Authorized capital: You must decide the authorized capital while incorporating a section 8 company. The authorized capital of a company is the maximum amount of share capital for which shares can be issued by a company to its shareholders. The initial authorized capital of the company is usually Rs. 1 lakh.
- Registered office: For registering a section 8 company in India, it is required that your business must have an official address where any communication relating to the company is sent. The registered office address appears on the incorporation certificate. This address will be publicly available on the Registrar of Companies (ROC) website for anyone to see. An office can be owned or rented and can be commercial or residential premises. You can use your residential address as your company's registered office.
- Documents: Section 8 company registration process is an online process, you can just scan /photograph the attested documents of subscribers/directors, shareholders and registered office from your mobile phone and send them to us, and rest will be taken care of.
Documents required for section 8 company registration:
Shareholder/director’s documents for section 8 company registration:
- Passport size photograph
- Copy of PAN card
- Copy of passport/ driving license/voter identity card
- Proof of residence (electricity bill/telephone bill /mobile bill / bank statement )
Documents required for the registered office:
- Latest electricity bill/ mobile bill/ telephone bill/ bank statement (business place)
- Copy of rent agreement (If rented property)
- Copy of property papers(If owned property)
- Landlord NOC (Format will be pcompanies
All documents should be self attested and be provided as a soft copy.
FAQS
Have questions about section 8 companies?
We have you covered:
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What is required to register a section 8 company?
Aside from the necessary documents mentioned on our documents page, a minimum of two directors or shareholders is required. A registered office address is also mandatory for company registration.
- How much is the minimum capital to form a section 8 company?
- Can foreign nationals and entities or NRIs register a section 8 company in India?
- Who is eligible to be the director of the section 8 company? And how many minimum directors are required?
- Is there any restriction on the payment of salary to an employee/director, who also happens to be a member of a Section 8 company?
- Can a Section 8 company make a profit?
- What is the minimum number of members required to form a Section 8 company?
- Can a Section 8 company be converted into a for-profit company?
- Can a Section 8 company accept foreign contributions?
- Can a Section 8 company engage in political activities?
- Can a Section 8 company apply for government grants?
- Can a Section 8 company carry out commercial activities?
- Is it mandatory to apply for FCRA registration for a Section 8 company?
- What is the difference between a Section 8 company and a trust?
- Can a Section 8 company be converted into a trust?
- Can a Section 8 company accept donations in kind?
- Can a Section 8 company have a profit-making subsidiary?
- Can a Section 8 company merge with another company?
- Can a Section 8 company change its objectives?
