Non Profit Company & NGO : Basics to Start

Here is the basic details about how to open and run a Non Profit Company & NGO with Indian Citizenship. We have explained the working models. One of our reader after reading the article on Private Limited Company formation, asked us to make the things around Non-Govermental Organization (NGO) easy. We wrote before – there are three methods for any kind of company related registrations – by oneself (we never suggest to use this way), with less payment in kind of DIY method (recommended way) and via fully managed service (too costly option, only better for Public Limited Company formation). DIY method means, stamps, pads etc. will not be given, there is practically no need to get them. Who ever has online presence and gives the service at least price, take that service. Audit is better to be done by a well established company’s Chattered Accountant. Let us first demystify the terminologies – Non Profit Company & NGO.

 

Non Profit Company & NGO : What Are Models and Laws

 

A good Chattered Accountant will not suck your money in repeated fashion. Unless you have complex matter, Chattered Accountant is the best person to suggest anything. We keep the Lawyers for running important business and communicate via HR. Lawyers are vultures. Kindly clear your Income Tax first via the Chattered Accountant. A clear audit with Chattered Accountant’s signature on the papers is like a death certificate signed by the author of this guide. In case of any litigation, Income Tax office will jump on the company via which the Chattered Accountant is working. They will not disturb you unless you are seeing illegal stuffs, exporting human females etc.

A non governmental organization (NGO) is an organization which does not follow a conventional for-profit business model. These can set up by the ordinary citizens, even the governments, foundations, businesses or persons.

If you have a private limited company, then it can open a non governmental organization. If you do not have any business, you can open a non governmental organization. Non-governmental organization (NGO) big thing and better to understand that – it differs from not for profit structure. Non-governmental organization (NGO) can have more power.

There are 03 ways to form Non-governmental organization (NGO) in India – Charitable Trusts, Societies and Section 8 of the Companies Act, 2013 (replaced old section-25 of the Companies Act, 1956). NGO’s main motive is social service and not to make any profits. Clear the phrases. Most of you only need either a Trust or a Society or a Section 8 Company. When NGO is needed? Suppose the author of this article opened a non-profit company for the disabled peoples related to Orthopedics to collect money for them. This needs a bit “power”. Because one legless person’s wife might disturb, author might need a bit “force”, one leg might be outside the Line of Control and hand in India – if you go there for humanity, Pakistan, China and India – all might start to spray bullets.

There are 03 ways to form Not for profit organization (NPO) in India – Trusts, Societies and Section 8 of the Companies Act, 2013 (replaced old section-25 of the Companies Act, 1956). This is not a copy paste of the above paragraph! Ways are same but scopes are different. Unless they are registered as NGO – these Trusts, Societies and Section 8 of the Companies Act, 2013 are not NGO in that sense.

NGO is a non-governmental organization where funds are raised usually by the government, but it maintains a non-governmental position. A non-profit organization uses their extra funds for the purpose of the organization, rather than dividing it between the shareholders and the owners of the organization. Second one is what we normally need. So, the difference of NGO and NPO is clear to you now. We will talk about NPO only. None has taxable income. You do not need NGO to run a Temple or a simple group – you need a Trust or Society or a Section 8 of the Company.

 

Non Profit Company & NGO : Which is Better – Trust, Society or Company?

 

Trust is for temple like things, Society is for a bit bigger matter – like Facebook’s one group can become society. We suggest to opt for Section 8 of the Companies Act, 2013 (old section-25 of the Companies Act, 1956). This is costly option but has huge advantages exactly like a Private Limited Company. What advantages we are getting?

Most of the privileges and exemptions under Company Law and some inherited rules which are applicable to all the member states of commonwealth of Nations. Unlike setting up a private or public limited company, there is exemption from requirement of minimum capital, there is exemption of stamp duty for registration, Companies Auditor™s Report Order (CARO) is not required (ask your CA), tax deductions to the donors of the Company U/S 80G of the Income Tax Act.

Plus – Trust and Societies can be dissolved easily. Unless you are opening a Ponzi Scheme, a company is very difficult to dissolve.

So, what are conditions to open a section-25/Section 8 Company? The Net Profit of the company must be applied for the promotion of the main objective. Dividend can not be given. There will be no officer. None will get remuneration as a servant or officer of the Company. Emasculated Private Limited Company is section-25/Section 8 Company. Like Private Limited Company – minimum two peoples are needed. We always suggest to have one as you and mother as the other in case of one child. If you have 25 bothers, then your mother must donate her portion before her death. Young wife can fly away in India in current situation with 50% of the assets. Your mother is also a wife, but frankly she has no way to fly away, when your wife attain her age, then she is good in terms of 50% division.

 

Non Profit Company & NGO : Practical Hard Words

 

It is better to have only females as directors as the Laws are favorable. If you are one child – grandmother and mother. In business there are 7 rules. One of them is to become inhumane. It is quite common to face very pathetic situation for having wife a director. Definitely it is non-profit. But non-profit also has a return. The return is fame, awards etc.

Take that, the author will open a “group” for Orthopedic Surgeons who are interested in Linux. You will suggest to open a Society. Society has lot of rules – what is problem with a section-25/Section 8 Company? Understood the complex control? Properties are yours, you are using the peoples as section-25/Section 8 Company can not add officers/servants. Legally they are only members of your section-25/Section 8 Company. It is fully monarchial and excellent way to control your credibility but fully of uniform power at the level of the members. Your decision is final, in short. You have give medals at the end of the year. Otherwise the members will not work.

Society is for very light works in today’s world – these are for taking God’s name, Wife’s kitty party etc. If author’s section-25/Section 8 Company’s name is My Orthopedic Surgeons Company Pvt. Ltd. then the members within the company becomes VIP member, Silver member etc. based on donation. VIP, Silver are funky works. “Give Money, I’ll Give You a Big Medal Plus Tax Deduction Slip.” IEEE is somewhat great example of this model of business. Free Software Foundation basically follows this model. The Indian Societies Registration Act of 1860 is far worser than Section 8 Company. India has no other “in-between” options. Copy paste the URLs in a text editor and then to browser to compare :

You will get DIN (Director Identification Number), USB thing like Private Limited Company. When you are writing a memorandum, why not a better thing :

Society was a low cost solution to get a legal entity in 1860. In 2015, honestly it is a bad model. All will start fighting to become President.

 

Non Profit Company in Foreign Nation

 

Singapore and England has excellent rules and if you need higher legal security, they are better options which we are saying as “”in-between options”. They are governed under UK Laws and Commonwealth accepted terms in 1935, only Reserve Bank of India can disturb. Queen has good tablet for it – you can use no Bank in UK or can use Indian Bank. Author lacks the knowledge on non-profit in England, but contacting any of the service providers of UK will happily elaborate the stuffs.

Ultimately you need a legal entity for your work. With the current situation of Governmental Spyware activities, it is better to decentralize the works. For working over the Internet there is no problem. Online conference has same legal value compared with a physical conference. We use BlueJeans as we have written before.

 

Freebies For Non Profit Company

 

Google AdWords, Premium GitHub and Free Google Apps are common freebies. If you have coding/Free Software related things, you’ll get Rackspace Hosting and SSL certificate for free of cost.