Private Limited Company and Section 8 Company are two different types of companies that are formed with different objectives. Both of the companies are non-government companies and require minimum 2 shareholders and 2 directors to incorporate them but the Section 8 Company is incorporated for charitable purposes whereas Private Limited Company is formed for profit maximization.
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What is Private Limited Company?
A private limited company is a type of business structure that is held privately by at least 2 shareholders and it is incorporated for commercial and profit-making purposes.
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What is Section 8 Company?
In India, Non-Profit organizations can register themselves either under the Trust Act, 1882 or the Societies Registration Act, 1860 or can be registered as company under the Section 8 of the Companies Act, 2013 (previously under Section 25 of the Companies Act, 1956). When any company is registered under the Section 8 of the Companies Act, 2013 as a non-profit entity with the aim of charity or non-profit purposes then it is known as Section 8 Company.
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Key differences between Private Limited Company and Section 8 company
BASIS |
PRIVATE LIMITED COMPANY |
SECTION 8 COMPANY |
Type |
Profit-Making Company |
Non-Profit Company |
Definition |
||
Objective |
Profit Maximization |
To encourage art, science, commerce, charity, education, religion, protection of the environment, social welfare, sports, research or any other advantageous object such as for any charitable or not-for-profit purposes |
Minimum Authorized Share capital |
Rs. 1 Lakh |
No limit is prescribed |
Company’s Name |
Must have suffix either “Limited” or “Private Limited” |
Must end with the words prescribed for such companies like “Foundation, Forum, Federation, Association etc.” |
Conversion |
Yes, It can be converted into Section 8 Company |
Yes it can be converted into Private Limited Company |
Voluntary Winding-up |
Yes, can be easily be wound up by voluntarily by filing STK-2 Form with the ROC |
It can be closed only by surrendering its license to operate as a non-profit company and such license can be surrendered only by converting its structure into Private Limited Company. Thereafter, the company can follow the winding-up process of Private Limited. |
Stamp Duty |
Mandatory to pay stamp duty as applicable on Company’s incorporation |
Not applicable |
Tax Exemptions (on non-profit organization only) |
Not Applicable |
Various Tax exemptions are provided to Section 8 Company and/or to the donors who are contributing to such companies |
Consequently, the structure of both of the companies are quite similar but are absolutely different from each other in terms of their main objective and functioning as the Section 8 company is formed for charitable purposes while Private Limited company is formed for profit-making purpose.
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Knowledge Source:
How to prepare Subscriber Sheet of MoA & AoA?