SETTING UP OF BUSINESS ENTITIES

Unit-II

Meaning of section 8 company:

● A Section 8 Company is a non-profit organization that aims to promote charitable

activities, art, science, education, and sports. The profits of such companies are utilized
for promoting these objectives and are not distributed among the Company's members.
● At IndiaFilings, we provide end-to-end services for registering Section 8 companies in
India. Our team of experts offers hassle-free and professional services to help you
establish a Section 8 company quickly and efficiently. Contact us today to avail of our
professional services for registering your Section 8 Company in India.

Definition of Section 8 company:

According to the Companies Act 2013, a Section 8 company is defined as an organization

whose objectives are to promote arts, commerce, science, research, education, sports, charity,
social welfare, religion, environmental protection, or other similar activities goals. These entities
utilize their profits to achieve their mission and do not distribute dividends to their shareholders.

Key Points about Section 8 Company

● In India, Non-Governmental Organizations (NGOs) can be registered under the Registrar
of Societies or as a non-profit entity under Section 8 Company of the Companies Act,
2013.
● Profit generated by Section 8 Companies cannot be used for purposes other than
charitable objectives and cannot be distributed among shareholders.
● Section 8 Companies are similar to the erstwhile Section 25 Company under the
Company Act 1956. As per the prevailing Company Act, these are now recognized as
Section 8 Companies.
● Section 8 Companies are required to comply with the provisions of the Companies Act
2013. They are mandated to maintain books of accounts, file returns with the Registrar
of Companies (ROCs), and comply with GST and IT Act.
● Any changes to the charter documents like the Articles of Association (AoA) and
Memorandum of Association (MoA) require the government's consent.

Benefits :
Tax Exemption
Section 8 companies registered under section 12AA of the Income Tax Act are eligible for a 100% tax
exemption, as they utilize their profits for charitable purposes. This is a significant benefit as the profits
generated by such entities are non-taxable.
No Minimum Capital Requirement
Unlike public limited companies, Section 8 entities do not have a minimum capital requirement. They can
adjust their capital structure according to their growth, giving them more flexibility.
Separate Legal Entity
Section 8 companies have a separate legal identity and perpetual existence, just like other registered
companies. This increases their credibility and provides them with more autonomy and legal standing.
Increased Credibility
Section 8 companies are subject to strict legal compliance frameworks, enhancing their credibility
regarding legal standing. Unlike NGOs and trusts, Section 8 entities follow stringent compliances
post-registration, making them more trustworthy.
No Title Required
Section 8 companies are free to choose a name that suits their liking during the registration process.
Unlike other registered structures, they are not required to affix the term "Section 8" after their name.

A Section 8 company in India offers numerous benefits, including tax exemption, no minimum capital
requirement, no need to pay stamp duty, separate legal identity, increased credibility, and no title required.
These advantages make Section 8 companies attractive for entrepreneurs looking to start a business with
a charitable or social cause.