Section 8 Company

A company is referred to as Section 8 Company when it registered as a Non-Profit Organization (NPO) i.e. when it has motive of promoting arts, commerce, education, charity, protection of environment, sports, science, research, social welfare, religion and intends to use its profits (if any) or other income for promoting these objectives.

Advantages of Section 8 Company

1. Tax Exemption – Numerous Tax exemptions are provided to Section 8 Companies, specifically to the donors who are contributing to Section 8 Companies, they can claim the Tax exemption against the donation they made to a Section 8 company.

2. No minimum capital requirement – There is no prescribed limit over section 8 companies for the minimum capital requirement unlike other entities such as public limited, but the capital structure can be altered at any stage as the required for the growth of the company.

3. No stamp duty payable – A section 8 Company is exempted for the payment of stamp duty applicable for registration as applicable in case of other structures such as private limited or a public limited company.

4. Separate Legal entity – A Section 8 Company also holds its own identity like other companies structures, and has its own separate legal standing from its member. A Section 8 Company also has a perpetual existence.

Disadvantages of Section 8 Company

1. The profits of the companies could only be used for its object fields only i.e., art, commerce, science, sports, environmental protection and fields of such sort and not on anything else.

2. There could be no distribution of its profits to its shareholders or partners unlike in other limited companies where all the persons having its share in the company can enjoy such rights.

3. Unlike in the other limited companies, no member related to such companies could be appointed as a remunerating officer.

4. The members could enjoy zero benefits or allowance or any other advantages as such. They could only be reimbursed for their pocket expenses that might have occurred in the course.

Documents Requirement for the Registration of Section 8 Company

  • Digital Signature Certificate
  • Memorandum of Association
  • Articles of Association
  • Passport Size Photographs
  • Members’ Id Proof such as Aadhar Card, Passport, Voter Id
  • Details of Director (When the Members Are Other Companies/LLPs)
  • Address Evidence
  • Director Identification Number