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What Is The Difference Between Trust, Section-8 Company & Society?

What Is The Difference Between Trust, Section-8 Company & Society?

Trusts, Section-8 companies, and societies are different legal entities with distinct characteristics and purposes. Here are the key differences between them:

  1. Trust:
  • Creation: A trust is created by a trust deed or a will, wherein a person (called the settlor) transfers property or assets to a trustee who holds and manages them for the benefit of specific beneficiaries or for a charitable purpose.
  • Regulation: Trusts are governed by the Indian Trusts Act, 1882.
  • Management: Trustees manage and administer the trust’s assets and carry out its objectives. They have a fiduciary duty to act in the best interest of the beneficiaries.
  • Tax Benefits: Trusts can avail tax exemptions if they are registered as a charitable trust or a public charitable trust.
  • Perpetuity: Trusts can be created in perpetuity, meaning they can exist indefinitely.
  • Flexibility: Trusts offer more flexibility in terms of managing and distributing assets as per the trust deed’s provisions.

2. Section-8 Company (Non-profit Company):

  • Creation: A Section-8 company is formed under the Companies Act, 2013, with the objective of promoting arts, science, commerce, education, social welfare, charity, religion, protection of the environment, or any other useful purpose.
  • Regulation: Section-8 companies are governed by the Companies Act, 2013, and the rules and regulations set forth by the Ministry of Corporate Affairs (MCA).
  • Management: Section-8 companies have directors who manage the company’s operations, and they must comply with various reporting and governance requirements.
  • Tax Benefits: Section-8 companies can enjoy tax exemptions if they are registered as a non-profit organization (NPO) under Section 12A and Section 80G of the Income Tax Act, 1961.
  • Perpetuity: Section-8 companies can be created with a limited or unlimited duration, depending on their objectives.
  • Compliance: Section-8 companies have to adhere to stringent compliance requirements, including annual filings, financial audits, and board meetings.

3. Society

  • Creation: A society is formed by a group of individuals who come together to promote a charitable, literary, cultural, scientific, or social cause. A Memorandum of Association and Rules and Regulations govern the society’s functioning.
  • Regulation: Societies are regulated by the Societies Registration Act of 1860.
  • Management: Societies are managed by a governing body or a managing committee elected from among its members.
  • Tax Benefits: Societies can apply for tax exemptions under Section 12A and Section 80G of the Income Tax Act, 1961, if registered as a charitable society.
  • Perpetuity: Societies can be created for an indefinite period, but provisions can be made for dissolution as per the society’s bylaws.
  • Compliance: Societies have fewer compliance obligations compared to trusts or Section-8 companies, but they still need to maintain proper accounts and follow relevant regulations.

Each entity type has its own advantages and considerations, and the choice depends on the specific objectives and requirements of the organization. It is advisable to consult a legal professional to determine the most appropriate legal structure based on the organization’s goals and activities.

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