The three types of organizations that are about to be discussed within this article are Non-Governmental organizations NGOs. These organizations are generally formed to promote social welfare, social development, and other charitable purposes.
In India, such an organization may be established as a Trust, a Society, or a Section 8 Company. Bear in mind that these are not the same. They have different purposes and uses depending upon what you intend to achieve through the establishment of the organization.
The registration process of NGOs under the Indian Trust Act, Society Registration Act, or The Companies Act, 2013 is different, but the status of the organization is equal of NGOs.
From the above comparison, we get an overview of the important points that need discussion before choosing from the proper type of organization. Apart from these, there are some other important matters that need to be taken into consideration for choosing a better option for your business- Trust, Society or Section 8 Company.
- What should you register- Trust, Society, or Company?
Depending on the type of work you want to do, it is best to apply accordingly. We can guide you for a better understanding as to which registration method suits your NGO the best.
- How to open NGO?
To open and run NGO, here are the few steps:
Step 1: Decide the cause and mission of your NGO
Step 2: Set up the board of directors/members
Step 3: Decide the name of your NGO
Step 4: Memorandum Articles of incorporation/ Articles of Association
Step 5: Get your NGO registered
Step 6: Start collecting funds
Step 7: Build a wide network
- Registration of NGO?
Once all the documents are ready, and after the submission of the fee, one can get his/her NGO registered under any of these Acts-
- Societies Registration Act (In society, a minimum of seven members are required to be the members)
- Indian Trusts Act (In charitable trust at least two people are required, there is no limit of maximum members)
- Companies Act (A non-profit company can be registered under section 8 of the Companies Act with the registrar of companies.)
- What are the benefits of NGO registration?
Registered NGOs obtain legal status to enable them to interact at the official level, and among donors and other organizations. Members can represent the organization, the NGO can open a bank account in the name of the organization, or sign contracts in the name of the organization. A registered NGO can also qualify for financial assistance from government agencies and local, national, and international donors.
- What are the benefits of Trust Registration?
A Trust is registered under The Indian Trust Act 1882 and provides for the provision related to Trust.
- Registered Trust Avails Tax Exemptions
The other main reason for setting up the registered Trust is to avail tax exemptions. Such charitable trusts are nonprofit organizations and to avail all these perquisites, the charitable trust should have a legal entity.
- Preservation Of Family Wealth
Trusts may be utilized to own specific assets, such as land/an interest in a family-based company, which would not be suitable or practical for a settlor to split between individuals. The usage of trust allows such individuals to benefit from the assets despite the fact that they do not own them. A trust will also assist to preserve the capital value of such assets for potential generations.
Trusts can be very effective in reducing taxation on capital and income. The trust may provide effective protection for the settlor, the beneficiaries, and the trust assets from punitive taxation. A frequent use for trusts is the mitigation or avoidance of inheritance tax in the settlor’s jurisdiction although this will, naturally, be subject to appropriate tax advice being obtained.
Trusts can be very effective in reducing taxation on capital and income. The trust may provide effective protection for the settlor, the beneficiaries, and the trust assets from punitive taxation.
- What are the benefits of Society Registration?
Registration of Society provides the following benefits:
- Purchase a certain property without legal hassles. Registered Society encounters lesser compliances while vesting the property in its own name.
- Its facilities opening the bank account in the name of Society.
- It provides the right to enforce legal proceedings in the Court of law.
- It helps the society to obtain registration under the Income Tax Act, the Foreign Contribution Regulation Act, etc.
- It enables the Society to raise funds from outsiders.
- Benefits of Registration under Section 8 of the Company’s Act?
Registration of Section 8 company provides the following benefits:
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.
- 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 required for the growth of the company.
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 perpetual existence.
A Section 8 Company has more credibility as compared to any other Non-profit organization structure be it a Trust or Society as it is licensed by the central government. A section 8 company due to its strict compliance as regard functioning has a more reliable image in comparison to other legal structures.
The Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust, and the like, etc.