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Section 8 Company

Section 8 Company

Section 8 company is a company which is licensed under section 8 of companies act, 2013. It is a non-profit organization (NPO) which is formed with the objective to promote commerce, arts, science, sports, education, research etc. The profit of such types of companies are applied towards the furtherance of their cause and no dividend is paid to any of their members. These companies are registered for social welfare, charity and meeting objectives of the organization towards the society at large. Incorporation certificates of such companies are obtained by the central government and are liable to adhere to the rules of the Central Government. As per the rules, if NPO fails to comply with the responsibilities stated by the Central Government, it may lead to winding up of the company on order of the Central Government. Moreover, strict legal actions will be taken against all the members of the company.

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Key Benefits of Section 8 Companies:

Legal Recognition and Credibility:

As entities registered under the Companies Act, they enjoy higher credibility and public trust compared to other forms of non-profits like unregistered trusts or societies.

Tax Benefits:

Section 8 companies are eligible for significant tax exemptions under the Income Tax Act, especially when registered under sections 12A and 80G, which allows them to retain more funds for their charitable objectives. Donors to these companies also receive tax exemptions on their contributions.

Limited Liability:

The members and directors of a Section 8 company have limited liability, meaning their personal assets are protected if the company faces financial difficulties.

No Minimum Share Capital:

Unlike other types of companies, a Section 8 company has no requirement for a minimum share capital, making it easier and more accessible to start a non-profit organization.

Separate Legal Entity & Perpetual Succession:

The company is treated as a separate legal entity, independent of its members, and its existence continues even if its members change or leave. This provides stability for the organization.

Stamp Duty Exemption:

Section 8 companies are exempt from paying stamp duty on certain documents, reducing the initial setup costs.

Professional Structure:

The framework of a Section 8 company provides a professional structure and governance for the organization, which can help in better management and operations.

Access to Funding:

Their enhanced credibility and professional structure make it easier to attract grants and funding from various sources, facilitating their philanthropic activities.

Focus on Social Impact:

The core purpose is non-profit, focusing on social welfare rather than profit distribution, with all earnings reinvested into the company's objectives.

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