An NPO/NGO can be formed for promotion of any useful object like sports, education, research activities etc. The term No Profit does not mean that the Company cannot generate profit or income, but it essentially means applying the income for further promotion of the object and not for distributing it to the promoters.
It means that the Company can earn profits but the promoters cannot be benefited out of those profits.
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What is Sec. 8 Company? (Earlier Known as Section 25 Company)
A nonprofit organization in India can be registered as a Trust or as Society under the Registrar of Societies as a private limited nonprofit company under Section 8 of the Companies Act, 2013. Earlier, this Section 8 was popularly known as Section 25 of the old Companies Act, 1956.
For what objectives Section 8 Company can be incorporated?
Section 8 Company can be incorporated to promote commerce, art, science, research, sports, social welfare, education, charity, religion, protection of environment or any such object. The condition is that such a Company should use its profits (if any) for promoting its objects and should not pay any dividends to its members.
Is taking license mandatory for a Section 8 Company?
Yes, taking license for section 8 company is mandatory.
How much capital is required?
As per Companies Act, 2013, there is no such restriction regarding capital to incorporate a company. This limit can be increased at any stage of the business in future as the business grows.
What is the minimum and maximum limit of directors to incorporate a Section 8 company?
Minimum two directors are required if incorporated as private limited and minimum three directors are required if incorporated as a public limited company. Maximum there can be 200 members if incorporated as private limited, but if incorporated as public limited there is no limit as such.
What are the benefits associated with the Section 8 company?
There are many privileges and advantages under the Company Law to Section 8 companies.
- Forming Section 8 company is an easy process
- Minimum paid-up capital is not required
- Stamp duty registration is exempted
- Any registered partnership firm can be a member in its individual capacity
- Tax deductions benefits u/s 12AA and u/s 80G of Income Tax Act to the donors of the company
- Greater flexibility
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