Benefits Of Formation Of Section 8 Company
(A) Limited Liability
Shareholder enjoys limited liability to the extent of capital invested. In case of any unforeseen liabilities, it would be limited to the company and not impact the shareholders. Shareholder's personal assets protected in the event of the company's insolvency.
(B) Separate Legal Existence
A Section 8 company is a Separate legal entity from its Owners and Management in the eyes of law.It can have a PAN number, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
(C) Corporate Title
Section 8 Companies are not required to add the suffix title “Limited” or “Private Limited” at the end of their name.
A Section 8 Company has more credibility as compared to any other Non-profit organization structure like Trust or Society.
(E) Share Capital
There is no minimum share capital requirement in formation of Section 8 Company. In case they are formed without capital, the necessary funds for carrying the business are brought in form of donations, subscriptions from members and general public.
(F) Tax Exemptions / Benefits
Section 8 Companies are given numerous deductions and other tax benefits. One of such exemption is under Section 80G of the Income Tax Act, 1961, whereby donors to Non-Profit Organizations may claim a 50% rebate against donations made.They are also required to pay less stamp duty as compared to other organizations.
Drawbacks Of Formation Of Secion 8 Company
A Section 8 Company has to ensure that its profits and all other incomes are utilized only for the purpose of promoting its objects and not for any other purpose. Moreover, it should also ensure that its profits are not distributed as dividend among its members.
(B) Alteration of Object
Section 8 Companies cannot alter its objects clause in its Memorandum and Articles without seeking the written approval of Central Government.
(C) Revocation of License
Section 8 Companies license can be revoked easily in case of non-adherence to its object and compliances.