Benefits of Section 8 Company Registration

Companies are of different types such as public limited companies, private firms, partnership firms, and LLP. Section 8 company is a type of company that works for the welfare of society and people. It promotes art, charity, and other activities for the well-being of society. We can say that section 8 company is a kind of non-profit organization.

Just like the registration of other companies, it is also easy to do Section 8 Company Registration in India by following some rules. Registration of section 8 companies has many benefits such as perpetual succession and tax benefits. This article highlights the definition of section 8 companies and how to register them and the benefits of registering this company.

Section 8 company

Section 8 Company is the one that works for the betterment of human beings as well as society. It does not work to earn any type of profit or benefit. These companies include charity trusts, sports associations, science centers, educational trusts, and any type of firm that works for the welfare of the people.

The income earned by these companies is used to improve the quality of life of society. It is also used to improve the health of poor sections of society and promote a healthy environment.

How is Section 8 formed?

Section 8 company can include one or more members. One or group of members can apply for Section 8 Company Registration by filling out all the necessary forms. This form has to be filed with the Registrar of the company. If the Central Government is satisfied with all the registration formalities, it will accept the application. Then the applicant has to pay certain fees and the Registrar will register Section 8 Companies.

Only limited companies can become Section 8 companies. These companies do not require the words such as “Limited” and “Private Limited” to their names. Moreover, section 8 companies cannot change their MOA or AOA or do anything that the license does not allow.

Special features of Section 8 Company

Section 8 companies have unique features such as:

·       No need for minimum share capital

No minimum paid-up share capital is required to register Section 8 companies.

·       Firms can become section 8 companies

Any individual or group of individuals and even firms can become members of section 8 company.

·       Limited liability of the members

Members of section 8 companies have limited liability like public listed companies. They cannot have unlimited liabilities in any case.

·       Goal of charity

Section 8 companies do not work for any type of profit or benefit. They work for the well-being and welfare of the people. These companies work for charity, health, welfare, and other kind of purposes.

·       Works with government license

Section 8 Company Registration can only be done after receiving a license from the Central Government. This license can also be revoked by the Central Government anytime.

Benefits of registering Section 8 company

There are several Advantages of Section 8 Company Registration that we discuss below.

1. No need to pay stamp duty

Section 8 companies are not required to pay any stamp duty after registration. They are exempt from paying any charge or fee as stamp duty. Only private limited companies and public listed companies must pay a stamp duty after registration.

2. No requirement to attach-title

Private companies have to put the word “Private” in their names. Even public limited companies have to put the word “Limited” after their names. But section 8 company does not have to add the words “Limited” or “Private” after their names. You can give any name to your section 8 company without suffixes.

3. Tax benefits

One of the major benefits of Section 8 Company Registration is that this company gets various tax benefits after registration. Many donors are exempted to pay taxes. They can even receive tax exemptions against donations they make to Section 8 companies. You can check the Companies Act 2013 to know more tax benefits of section 8 companies.

4. Strict regulations

Section 8 company has stricter rules and regulations than other companies. It receives a license from the Central Government and it has more credibility than other kinds of companies. Moreover, section 8 companies are more reputable than other types of companies. 

5. No need for minimum capital

Section 8 Company Registration can be done without a minimum share capital rule. These companies can also alter the capital structure for the growth of the company.

6. Separate image

Like LLP and public limited company, even section 8 companies get legal status after registration. The company gets a separate legal image from its members after getting a license from the Central Government.

7. Transfer of ownership

Section 8 companies can transfer their titles or ownership easily as per the Income Tax Act, 1961.