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Section 8 Company

A Section 8 Company is a Non-Profit Organization (NPO) which is established to promote art, science, commerce, religion, charity, education, protection of the environment, social welfare, sports, research or any other advantageous object i.e. for charitable or not for profit purposes. The profits derived from such promotion cannot be used by the members but can only be utilized to support and promote the objectives of the company. No dividend is paid to its members from the income earned.

The central government provides an incorporation certificate to all such companies and also informs them about some restrictions and conditions. Legal Suvidha Providers expert will help throughout the whole process of incorporation by giving expert advice as well at every step. Before opting for a Section 8 Company following points must be kept in mind:

• Section 8 company is similar to Trusts & societies. But trusts & societies are registered under state regulations. Section 8 companies have various advantages over trusts & societies in terms of improved recognition & better legal standing, higher credibility in the market, etc.
• A section 8 company works as a limited company but it cannot use the word ‘limited’ in its name.
• In case they don’t fulfill them, the central government may also order them to wind up the company.
• In case the fraud objectives of the Company are proved, legal action will be taken against all officers of the Company.

Why Section 8 Company?

PRIVILEGES AND EXEMPTIONS FROM GOVERNMENT Many privileges and exemptions are available to section 8 company under Company Law.
CREDIBILITY Section 8 company enjoys more credibility as compared to any other non-profit organization be it a trust or a society due to more stringent regulations regarding functioning paints a more reliable picture.
NO TITLE TO BE SUFFIXED Unlike Private Limited or Public Limited Company, there is no requirement of suffixing any title like Pvt. Ltd., etc. next to its name.
NAME OPTIONS Section 8 Company can be registered with names containing words like Association, Foundation, Club, Charities, Foundations, Organisation, etc.
TRANSFERABILITY Another advantage of Section 8 Company is that the management can be transferred easily by just altering the composition of the Board of Directors.
NO MINIMUM CAPITAL Section 8 Companies are exempted from the requirement of Minimum Paid-up capital
NO STAMP DUTY Section 8 Companies are not required to pay any Stamp duty for registration
DEDUCTION UNDER SECTION 80G TO DONORS Donors of the Company is entitled to tax deduction u/s. 80G of the Income Tax Act.
EASE OF FORMATION Section 8 company can be formed by two persons only, by complying with the prescribed formalities of the Companies Act. Many privileges and exemptions are provided under Company Law. A registered partnership firm can be a member of its capacity.
LIMITED LIABILITY The greatest benefit of Section 8 Company is a limited liability. If any liability arises then its member is not personally affected; members are only liable for unpaid shares held by them and not more than that. Being the biggest advantage of this type of company, it means that the owners are not personally responsible for business debts and obligations of the incorporation.
SEPARATE LEGAL ENTITY This is the most prominent quality of a Section 8 Company. It refers to the statement that the company and its members are completely distinctive. The biggest advantage of a section 8 company is that its identity is distinct from that of its members. A company is a separate person having its rights & Obligations.
GREATER FLEXIBILITY A Section 8 company is required to perform lesser legal formalities as compared to a public company. It enjoys special exemptions and privileges under the company law.
PERPETUAL SUCCESSION Death, insolvency and insanity, etc of any of the members does not affect the continuity of the company. Thus the life of the company does not depend upon the life of its members. In the case of the death of the owner or transfer of shares, your business won’t get affected.
TAX BENEFITS A Section 8 company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets.

Company Registration Process

Documents required

1. ID proof for members

2. Address Proof

3. Passport size Photographs

4. Copy of Rent agreement(If rented property)

5. Electricity/ Water bill (Business Place)

6. Copy of Property papers (If owned property)

7. NOC of Landowner

8. Director’s Directorship details (in other Companies/LLPs, if any)

Frequently Asked Questions

Profit or Income of Non-Profit Company can only be used for promotion of the charity work in which it is involved. Even the declaration of dividend or distribution of profit to its promoters is not allowed.

No. Promoters of Non-profit company can be employed as paid employees of the company.

Yes, Section 8 company be converted into a private limited company after taking the approval from ROC.

The Director required to be above 18 years of age and must be a natural person. He may or may not be a citizen or residence of India. We can say that even foreign nationals can be Directors in Indian Section 8 Company.

In the case of Section 8 Company, minimum no. of the director is two.

No minimum paid-up capital is required to register the Section 8 company.

• Apply for PAN and TAN
• Apply for Sales Tax / Service Tax Registration based on the nature of Business.
• Filing ADT-1 for Appointment of First Auditor of the Company within 1 Month of Incorporation of Company and in case the Board fails to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an Extra Ordinary General Meeting appoint such auditor and such auditor shall hold office till the conclusion of the first Annual General Meeting.
• Filing Income Tax Return of Company on or Before 30th September every year
• To maintain proper Books of Accounts
• Get your account books Audited Every Year.

Yes, an NRI can register a Section-8 Company provided all the documents required are submitted and notarized by the professionals.

There are various privileges and exclusions under Company Law.
• There is no need for a Minimum paid-up Capital.
• Stamp duty registrations are also exempted.
• Companies Auditor is not applicable.
• Any registered partnership firm can be a member of its capacity.
• Tax deductions to the donors of the Company.

It is important to have objects with a non-profit motive, and then it can be registered as Section-8 Company.

he registration under the Companies Act, 1956 is unchanging in nature and provides continuous existence. Under extreme conditions, such companies can be reimbursed. The government is the official liquidator of Corporations.

Yes, Corporate Social Responsibilities(CSR) is a part of all companies and similar to Section 8 Company it has non-profit related objectives.

The main objectives of Section 8 Company must ensure that it is related apply its profits(if any) in promoting and supporting the objectives. It should not provide any benefit/fund to its members. The objects to be promoted includes:
• Commerce
• Science
• Sports
• Research
• Education
• Social Welfare
• Religion
• Charity
• Protection of Environment.

Compare your options

Private Limited Company Limited Liability Partnership One Person Company Partnership Firm
Preferred for Start-ups Professional Services Firms Sole Proprietors Small-medium sized businesses
Limited Liability Protection Yes Yes Yes No
Minimum Requirement 2 Shareholders 2 Designated Partners 1 Director
1 Nominee
2 Partners
Fund Raising Options High Low Low Low
Tax Advantage Few Most Few Minimal
Statutory Compliance's High Low High Minimal
Compliance Cost High Medium Medium Low
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