Section 8 Company Registration
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Section 8 Company Registration
A company registered under Section 8 of the Companies Act, 2013 or a company registered under Section 25 of the Companies Act, 1956 means an organisation registered for the purpose of promoting art, science, literature or sharing of knowledge or for charitable purposes. Section 8 Companies are regulated by the Companies Act, 2013. The government has given special authority to these companies under Section 8 of the Companies Act. There are three main factors for permission.
Benefits of Section 8 Company Registration
1. Tax Benefits
- Tax Exemptions: Section 8 companies are eligible for various tax exemptions under the Income Tax Act, 1961. Once registered as a charitable entity, the company can apply for Section 12A registration, which exempts its income from taxes.
- 80G Certification: Donations made to a Section 8 company are eligible for deductions under Section 80G of the Income Tax Act, encouraging donations from individuals and corporations.
2. No Minimum Share Capital
- A Section 8 company is not required to maintain any minimum share capital. The company can be incorporated without any specific paid-up capital, allowing it to focus on its charitable objectives without the burden of maintaining a specific financial threshold.
3. Limited Liability
- The members and directors of a Section 8 company enjoy limited liability, meaning their personal assets are protected in case of any legal or financial liabilities incurred by the company. This encourages more people to contribute or take leadership roles in the company without the fear of personal financial risk.
4. Separate Legal Identity
- A Section 8 company is a separate legal entity from its founders and members. This means it can own property, enter into contracts, and sue or be sued in its own name. This separation enhances the credibility and longevity of the organization, independent of the individuals involved.
5. Perpetual Succession
- Like other companies, a Section 8 company has perpetual succession, meaning it will continue to exist regardless of changes in membership or leadership. This ensures that the charitable objectives of the company are pursued for an extended period.
6. Credibility and Trust
- Section 8 companies are regulated by the Ministry of Corporate Affairs (MCA), and their financials are audited and reported annually. This transparency and accountability make Section 8 companies more trustworthy to donors, government bodies, and other stakeholders.
- The status of being a non-profit organization registered under the Companies Act provides more credibility than other forms of charitable organizations like trusts or societies.
7. No Stamp Duty
- Section 8 companies are exempt from paying stamp duty on the MoA (Memorandum of Association) and AoA (Articles of Association), which can be a cost-saving benefit during the incorporation process.
8. Exemption from Titles
- Section 8 companies are exempt from using the terms “Limited” or “Private Limited” in their name. This gives them a distinct identity and reflects their focus on non-profit objectives rather than commercial interests.
9. Governance and Management
- Section 8 companies are governed by the Companies Act, 2013, which ensures strict regulations regarding management, operations, and accountability. This results in better corporate governance and compliance, compared to other non-profits like trusts and societies.
10. Foreign Contributions
- Section 8 companies can receive foreign donations by registering under the Foreign Contribution Regulation Act (FCRA). This can help the organization secure international funding and support for its activities.
11. Professional Image
- Section 8 companies, due to their structured form and adherence to the regulatory framework of the Companies Act, project a more professional and formal image. This attracts more corporate donors, CSR (Corporate Social Responsibility) funding, and government grants.
Section 8 Company Registration Process
Step 1: Obtain Digital Signature Certificate (DSC)
- A Digital Signature Certificate (DSC) is required for all proposed directors of the company.
- The DSC will be used to sign electronic forms on the MCA portal.
- You can obtain the DSC from government-approved agencies by submitting identity and address proofs such as Aadhaar, PAN, and passport-sized photographs.
Step 2: Apply for Director Identification Number (DIN)
- All proposed directors must have a valid Director Identification Number (DIN).
- If the directors do not already have DINs, they can apply for one while incorporating the company using SPICe+ form (Step 5).
Step 3: Name Approval
- Choose a suitable name for the company. The name should comply with the naming guidelines as per Rule 8 of the Companies (Incorporation) Rules, 2014.
- The name should reflect the charitable objectives of the company.
- To apply for name reservation, you need to file RUN (Reserve Unique Name) form on the MCA website.
- You can propose two names in order of preference.
- Once approved, the name will be reserved for 20 days.
Step 4: Draft the Memorandum and Articles of Association (MoA & AoA)
- The Memorandum of Association (MoA) outlines the main objectives of the company, which must be for charitable purposes such as promotion of commerce, arts, education, research, social welfare, etc.
- The Articles of Association (AoA) govern the company’s internal management and its functioning.
- Ensure that these documents clearly mention that the company will not distribute any profits to its members but will utilize them for achieving its charitable goals.
Step 5: File SPICe+ Form for Incorporation
The Ministry of Corporate Affairs (MCA) has introduced SPICe+ (Simplified Proforma for Incorporating Company Electronically) form to simplify the company registration process. Follow these steps:
- Login to MCA Portal: Create an account and log in to the MCA portal.
- Part A (Name Reservation): This section is used for name reservation. If you’ve already reserved the name using RUN, you can proceed to Part B.
- Part B (Incorporation): Fill in the necessary details, including:
- Type of Company: Section 8 Company (Non-Profit).
- Directors’ and Subscribers’ Details: Enter the details of the directors and subscribers.
- Registered Office Address: Provide the company’s registered address.
- Attach Documents (MoA, AoA, ID proof, address proof).
Name Approval of Section 8 Company Registration
The registered name of a company as specified in Section 8 should be short, simple and specific, containing facts indicating the meaning of the NGO etc. Registration and approval of the company name is required. This helps in avoiding legal issues and ensures that no other company listed under Section 8 is registered under the same name. In order to obtain approval, the INC-1 application form needs to be sent to the Registrar of Companies (Central Registration Centre – CRC of the Ministry of Corporate Affairs). Applicants need to submit six unique names for name approval to reduce duplicate names. Once approved, the name is valid for up to 60 days. As per the Companies (Companies) Regulations 2014, the name application must contain the root words like establishment, forum, council, business unit etc. for Section 8 to be recognised as a legal company name.
Section 8 Company Registration FAQ's
A Section 8 Company is a type of non-profit organization registered under the Companies Act, 2013. The main objective of a Section 8 Company is to promote charitable activities like arts, commerce, science, education, sports, social welfare, environmental protection, and research without distributing profits to its members.
Any individual (resident or non-resident) or organization can start a Section 8 Company. However, it must be formed with the objective of promoting a charitable purpose. There must be at least two individuals for a private Section 8 company and at least three individuals for a public Section 8 company.
The key features include:
- No profit distribution: Profits are used to promote the company's objectives.
- Limited liability: Members' liability is limited to the extent of their shareholding.
- No minimum capital requirement: There is no fixed minimum capital required to register the company.
- Perpetual succession: The company continues to exist even if its founders leave or change.
- Tax benefits: Section 8 Companies are eligible for various tax exemptions under the Income Tax Act.
- CSR funding: They can receive corporate social responsibility (CSR) funding from businesses.
- Credibility: The company form is more structured, with a legal framework that improves its credibility.
- Donations eligibility: Section 8 Companies can apply for 80G certification for tax benefits to donors.
There is no minimum capital requirement for registering a Section 8 Company. The company can be formed with any capital amount, and it can be increased as per the requirement of the company.
- Digital Signature Certificate (DSC) for all proposed directors.
- Director Identification Number (DIN) for all directors.
- ID proof (PAN card for Indian nationals, passport for foreigners).
- Address proof (Aadhaar, voter ID, utility bill, or passport).
- Memorandum of Association (MoA) and Articles of Association (AoA).
The registration process typically takes 15-20 working days, depending on document submission and government approval. However, delays may occur if the application or documents are incomplete or incorrect.
Yes, a DSC is mandatory for all proposed directors to sign the electronic forms during the registration process. You can obtain the DSC from government-approved agencies.
The name of a Section 8 Company should align with its objectives. Unlike other companies, a Section 8 Company is not required to include the words “Private Limited” or “Limited” in its name. The name should be unique and should not conflict with any existing companies.
The cost of registering a Section 8 Company includes government fees for filing forms and professional fees for preparing and filing the required documents. The total cost generally ranges between ₹8,000 to ₹15,000, depending on the state of incorporation and professional services used.
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