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The three types of organisations that are about to be discussed within this article are Non-Governmental Organisation a.k.a NGO’s. NGO’s are usually also referred to as Non-Profit Organisations. These organisations are generally formed to promote social welfare, social development and other charitable purposes.

In India, such an organisation 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 organisation.

  • When To Consider Forming a Society?
  • When To Consider Forming a Trust?
  • Reasons For Forming a Section 8 Company
  • Difference Between Society, Trust, and Section 8 Company
  • 1. When To Consider Forming a Society?

    • It is the ideal organisational body if you want an elected body to manage it.
    • If the members do not want to be bound in perpetuity to it, a society allows for an easy exit of its members.
    • If your choice is dependent upon which one of the three is easiest to wind up, then you should go for forming a society. Comparatively a society is easier to wind up than booths trusts and Section 8 companies.

    2. When To Consider Forming a Trust?

    • In case more than one family member is running the business.
    • If you want the trustee to hold office for his or her lifetime without the need for an election.
    • Privacy in activity as well as flexibility in the division of benefits.

    3. Reasons For Forming a Section 8 Company

    • If the purpose is for executing a wide range of activities.
    • To gain reliability and credibility as it is an approved establishment by the central government.
    • To achieve the legal structure of a company without the need for high capital.

    4. Difference Between Society, Trust, and Section 8 Company

    In the table below we will bring out the differences between the three different forms of organisation.

    Particulars 

    Trust

    Society 

    Section 8 Company

    Meaning 

    It is considered to be the oldest form of charitable organisations. It is, in essence, an arrangement between parties whereby one party holds ownership over property on behalf of another person

    It is formed when a collection of people come together for a common charitable purpose. But it is not limited to charitable purposes but may extend to multiple other fields.

    It is a company established with the purpose has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object and whereby they apply any profits into furthering the objective.

    Governing Legislation 

    A trust is established under and governed by the Indian Trust Act, 1882 for private trusts. General law is applied for public trusts except in a few states such as Gujarat and Maharashtra, which have their own state laws.

    Societies Registration Act,1860.

    Companies Act, 2013

    Registered as

    NGO/NPO

    NGO/NPO

    NGO/NPO. But they enjoy all the privileges of a limited company without the need for them needing to add Pvt. Ltd. to the name.

    Document of constitution

    Trust Deed

    MOA (memorandum of association) and rules and regulations

    MOA and AOA (articles of association)

    Registration Authority 

    Deputy Registrar of the state

    Registrar or Deputy Registrar of the particular state in which it is to be registered.

    Registrar of Companies (ROC) or Regional Director

    Minimum members required 

    2 trustees minimum

    7 members minimum (5 for Jammu and Kashmir and Telangana)

    2 directors and 2 shareholders. It should be noted that the directors may also be the shareholders.

    Annual compliances

    There are no mandatory yearly compliance to be met by a trust

    The society must file the list of names, occupations and address of the managing committee members of the society to the Registrar annually

    The company must file the annual returns and accounts with the ROC.

    Cost factor

    Low 

    Medium 

    High 

    Grants and subsidies from the government

    Not much

    Not much

    Considerable (possible)

    Preference in registration under  FCRA 

    Low preference 

    Low preference 

    Preferred 

    Registration under The Income Tax Act, 1961

    Allowed 

    Allowed 

    Allowed 

    Transparency 

    Low 

    Low 

    High

    Legal right over the property

    Held by the trustee

    Held in the name of the society 

    Held in the name of the company

    Registration period (approximately)

    15-20 days

    20-25 days

    30-45 days

    Stamp duty

    Dependent upon the state stamp duty Act a well as the total worth of the property involved in the matter.

    None 

    None 

     

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