Streamlining Section 8 Company Formation and Management for Charitable Success

1. Criteria:
A Section 8 Company is a non-profit organization formed for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, and similar objectives. Profits must be used solely for these purposes, with no dividends paid to members. The incorporation process is similar to other companies, with additional requirements for Section 8 licenses.

2. Separate Legal Entity & Limited Liability:
Section 8 Companies enjoy perpetual existence and can own, sell, and transfer property and incur debts. They benefit from limited liability, protecting owners' personal assets from business liabilities.

3. 12A Registration Benefits:
Section 8 Companies can apply for 12A registration under the Income Tax Act, 1961, to gain income tax exemption on surplus income. New registrations must comply with Section 12AB from October 1, 2020, with provisional registration granted for three years.

4. 80G Certificate:
With an 80G Certificate, donors to Section 8 Companies can receive tax exemptions. Effective from October 1, 2020, the certificate is granted for five years, and even older companies must reapply.

5. FCRA Registration:
To raise foreign contributions, Section 8 Companies must register under the Foreign Contribution & Regulation Act and be in existence for at least three years.

Comparison with Society and Trust:

Society: Regulated by the Society Registration Act, 1860. Minimum 7-8 members needed; foreign members make FCRA registration difficult.
Trust: Regulated by the Trust Act/Bombay Public Trust Act. Minimum 2 trustees needed; family members can be trustees, but this might affect funding.
Section 8 Company: Regulated by the Companies Act, 2013. Minimum 2-7 members needed; most preferred for FCRA registration.
Compulsory Annual Compliances:

MCA filings, including commencement certificates, auditor appointments, DIR-3 KYC, statutory register preparation, share certificate issuance, stamp duty payment, board meetings, and annual general meetings.
Mandatory accounting, auditing, and IT filings.
Situational Compliances:

12A registration for tax exemption on surplus income.
80G exemption certificate for tax benefits on donations.
FCRA registration for foreign contributions.
Trademark registration for brand and logo.
Trade license, professional tax filing, EPFO registration/compliance, and ESIC registration/compliance based on employee count thresholds.