Section 8 company is an organization which is registered under Section 8 of the companies’ act 2013. The main objective is to promote various fields including arts, science, education, social welfare, commerce, research, charity, sports, environment protection and many other similar kinds of objectives. All the profits of the organization are further utilized for promoting the company’s objectives and no dividends are being paid to any of the company’s members.
The section 8 companies were earlier part of section 25 act, 1956 where more or less the provisions were similar. But the only difference is that Section 8 has added furthermore objectives. The biggest example of Section 8 Company is the Confederation of Indian Industries which has the objective to facilitate the commerce and trade of the country.
Benefits of incorporating a section 8 company
There are a lot of advantages that come up with the development of a Section 8 company in comparison to a private and public limited organization. Have a look at them below;
The first and foremost advantage of a section 8 company is that it is a non-profit organization and hence it gets certain exemptions of income tax. Many other deductions and tax benefits are also part of this exemption process. As compared to the other organizations, section 8 company has to pay very less stamp duty. The benefits under section 80G of income tax, 1961 are also availed by these companies.
- Share capital minimization
The companies that are registered under section 8 do not have the requirement of bigger share capital as compared to the single person organization or the private and the public companies. Section 8 companies can get direct funds and donations and utilize them.
The private and public associations are not allowed to transfer the ownership or title as these are the limited liability companies. Section 8 gives the power of transferring the ownership or the title without any sort of restriction whether it is immovable or the movable interest.
As a section 8 company, these non-profit organizations do not need to use any sort of titles like limited, etc. The company can continue its operations without informing anyone about the liability related status.
Objective towards establishing section 8 companies
The private companies that are established in the country work for their own personal profits and not for society. The main agenda of the government towards incorporating section 8 companies is to work in perspective with the welfare of the society as India is a developing country. Major welfare is required in the field of education, sports, environment protection, etc and to fulfill this agenda, these companies have come into existence. Along with the promotion of the above-mentioned areas and many others, the public interest is always kept into consideration.
Requirements to form a section 8 company
The basic minimum requirements to establish a section 8 company are as follows:
- A minimum of two stakeholders are required
- At least two directors should be available(the same person can be the director as well as the stakeholder)
- One director must compulsorily be the Indian resident.
- No minimum capital requirements.
- It is mandatory to have income-tax PAN
- One of the identity proofs is compulsory out of Aadhar card, Voter ID, Passport and Driving License. In case you are a foreign national, Passport is mandatory.
- One of the residence proofs is required out of telephone bill/ mobile bill, bank statement, and electricity bill.
- In the case of rented premises, the latest utility bill and a no-objection certificate are required from the owner’s end.
- If the director or the promoter is the owner of the property, any of the documents out of House tax receipt or sale deed receipt is required. Also, no objection certificate is required.
Process for the registration of section 8 company
The process of registering a section 8 company is exactly the same as for any of the private limited companies.
- It has to include all the obligations and rights that come along with a limited company. The only difference while registering a section 8 company is that you need to seek a license from the central government.
- After getting the license, the company becomes eligible for all the further exemptions and the other benefits and concessions.
- There are few more processes including the name processes etc which have to be completed for the registration process.
Is there any time limit for setting up the section 8 company?
In order to incorporate a section 8 company, you need to set up a name. You need to go to ROC for the name approval process. Once the approval is done, within 7 days it is mandatory to incorporate the section 8 company else you will have to again for the name approval process.
These are the complete details about the section 8 company, what it is, how to set it up and what advantages you get with this type of company.
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