Companies Act, 2013 introduced section 8 Company which is similar to Section 25 company of the Companies Act, 1956. The general purpose of starting a section 8 company is to do social or welfare activities where the profits of the company can not be distributed as the dividend to its members. Section 8 Company registration procedure is different from the incorporation of a private limited company or an LLP. A separate license of section 8 company is required to be obtained before incorporation by applying to the central government of India. To get the license for section 8 company a statement of the objects of the company and projected statement of income, expenditure, assets and liabilities for three years is required to be submitted to the regional director of the ministry of corporate affairs. The detailed conditions, documents required and the procedure of incorporation of section 8 company is as under..
Director / Shareholders Documents
Registered Address Proof
Advantages of Section 8 Company Registration
Income Tax Exemption
A section 8 Company is subject to tax @ 30%, however, if registered under section 12 of the income tax act, 1961 entire income of the company is tax-free. The persons donating money to such organisations also get the tax benefit.
No minimum capital requirement
There is no need to prescribe or subscribe to a minimum paid up capital for section 8 company. As it is for social or welfare cause, section 8 company can be funded by donations, subscriptions from the public at large or its members.
Stamp Duty Not Payable
There is no stamp duty payable on the incorporation of section 8 company in India as against the provision of payment of stamp duty on MOA and AOA of a private limited company.
Separate Legal entity
A section 8 company is a separate legal entity and after its incorporation acquires a distinct legal identity separate from its members. Its existence is perpetual which can be interfered only by law.
Credible than a society or trust
As an incorporated entity a section 8 company is more credible than any other form of charitable organisation. It is subject to stringent reporting under companies Act which also requires its mandatory audit every year.
No title needed
A section 8 company does not have to add private limited or Limited at the end of the name, even if it is incorporated as a company under the companies Act, 2013 and can retain its identity in its name.