How to start a Section 8 Company?



Do you want to help people in an organized manner? Why don’t you start a company?

Yes, you heard it right. You can start a company whose specific job is to help people.

And it’s called a Section 8 Company.

A Section 8 Company is a business entity whose purpose is not to generate profits and divide them among its members. But rather, it’s purpose is to use those profits to fulfil its business objective, which can be any of the following:

1. Promotion of research
2. Promotion of social welfare
3. Promotion of religion
4. promotion of charity
5. Promotion of art
6. Promotion of Science
7. Promotion of Sports
8. Promotion of environment conservation or
9. any such cause.

A Section 8 Company is similar to a trust or a society. However, the major difference between the two is that as a Company, it’s registered under the Ministry of Corporate Affairs, and is governed under the Companies Act, 2013.

In this article, we are going to dive into the process of Section 8 Company Registration and alongside take the journey that answers the following questions:

1. What is the eligibility to start a Section 8 Company?

2. How to start a Section 8 Company?

3. What are the benefits to start a Section 8 Company?

4. How can you start a Section 8 Company cost-effectively?

What is the eligibility to start a Section 8 Company?

In order to start a Section 8 company, you need to fulfil the eligibility criteria that exists in the Companies Act, 2013:

1. You should at least have two shareholders

2. You should at least have two directors.

3. The directors and the shareholders can be the same individuals.

4. You don’t need any capital to start a Section 8 company.

5. The director and the shareholders of a proposed Section 8 Company need to have a PAN card.

6. While Indian nationals can register a Section 8 Company by presenting generic Identity proofs, foreign nationals have to present a copy of their passport.

How to start a Section 8 Company?

As soon as you fulfil the eligibility criteria, you can initiate the process of Section 8 Company Incorporation:

1. Choose a good name for your Section 8 Company: A Section 8 Company’s purpose is to help people. Therefore, you should choose a name that reflects that purpose, and sends people the message of the same. Pick a simple name which is also unique.

2. Furnish the required documents for Section 8 Company Incorporation: Following are the documents that you need to furnish to register a Section 8 Company:

a. ID proof of the directors

b. Photo IDs of the directors

c. ID proof of the Shareholders

d. Photo Ids of the Shareholders

e. Address proof of the directors

f. Address Proof of the shareholders

g. Address Proof of the registered office space. It can be either of the following two:

i. Rent agreement if you have rented the place you are conducting the business in, or

ii. A property registry if you own the place of business.

3. Obtain DSC and DIN: DSC or Digital Signature Certificate is the core document you need to authenticate your online submitted documents. Once you acquire it, get the DIN or Director Identification Number, a unique ID issued to prospect directors of the companies.

4. File the RUN application to reserve the name of your company: Even though it’s an optional step, it’s better to reserve your company name now than regret about losing it later.

5. Draft the MOA and AOA: Draft the Memorandum and Articles of Association of your company.

6. File the application for company registration: Go online and file the application of Section 8 company registration. Better yet, get a Chartered Accountant or a Company Secretary to help you out.

7. Get the certificate of incorporation: Once your application is filed, it will be processed. Once it’s processed, it will be either accepted or rejected. If it’s rejected, you’ll be notified – prompting you to fix your application and resubmit. If your application is accepted, you’ll still be notified, but you’ll receive the certificate of incorporation in your email.

What are the benefits of Section 8 company?

Other than the obvious benefits that involves feeling good about helping others, there are also materialistic benefits of company registration. They are as follows:

1. The donors of your Section 8 company can enjoy some tax exemption. It has a positive impact on your endeavour as it helps bringing in more donations.

2. You can start a Section 8 Company even if you don’t have any money.

3. A Section 8 company is more credible than a trust and a society. That factor makes it easy for donors to put their trust into you.

4. You don’t need to add “company” at the end of your organization’s name.

How can you start a Section 8 company cost-effectively?

Starting a Section 8 Company can be a pricey endeavour, but only if you don’t have right contacts to help you out. There are many business consultants, spread across the country who take great pains in getting your section 8 company registration. These section 8 company consultants can:

1. File the application of company registration on your behalf.

2. Make sure that all the required documents are furnished properly.

3. Monitor the application once the Registrar of Company accepts it.

4. Do the above three while charging only a marginal amount of money.

They can provide you a cost-effective way to start a Section 8 Company.

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