Society VS Trust VS Sec25Company
This query is : Resolved
18 December 2008
I want a complete Cost Benefit Analysis (including compliances required in their respective laws applicable on it) for decision making whether i should register our non-profit making organisation (foundation) as Society or as trust or incorporate as sec 25 company..
(Please, also tell me about tax implication in all these three options)
mail me at : aadarshg@rediffmail.com
(Please, also tell me about tax implication in all these three options)
mail me at : aadarshg@rediffmail.com
18 December 2008
Wl mail u a document in this regard
vivek
vivek
22 December 2008
The simplest constitution for a non-orofit making organisation is to go for a Society under the Societies Registration Act of 1860.
01 February 2010
Please let me know the state where you are planning to create the trust. You can also register the trust deed under the registration act.
26 March 2012
Chhattisgarh state.. I still need the comparison..
25 July 2025
Here’s a clear **Cost-Benefit and Compliance Comparison** between a **Society**, a **Trust**, and a **Section 8 Company (formerly Section 25 Company)** for your non-profit organization (foundation), with a focus on **Chhattisgarh** but generally applicable across India:
---
## 1. **Society**
### Registration & Formation
* Registered under **Societies Registration Act, 1860** (state-specific rules apply).
* Requires minimum **7 members**.
* Relatively easy and inexpensive to register.
* Governing document: Memorandum of Association and Rules & Regulations.
### Compliance
* Annual General Meetings (AGM) mandatory.
* Annual filing of financials to Registrar of Societies (varies by state).
* Maintenance of minutes book, membership register, and accounts.
* Less stringent reporting requirements compared to companies.
* Audit usually required if income exceeds threshold.
### Cost
* Low initial registration fees.
* Moderate ongoing compliance cost.
### Advantages
* Easy to set up and operate.
* Flexible structure.
* Good for membership-based organizations.
* Accepts donations and can get 12A and 80G tax exemptions (subject to application).
### Disadvantages
* Less credibility compared to Section 8 company.
* Governance can be weak without clear rules.
* No perpetual succession in some states.
* Limited powers compared to companies.
### Tax Implications
* Exemptions under **Sections 12A and 80G** available if registered under Income Tax.
* Subject to scrutiny if funds are misused.
---
## 2. **Trust**
### Registration & Formation
* Registered under **Indian Trusts Act, 1882** (for private trusts) or Public Trust Act applicable in some states for public trusts.
* Minimum 2 trustees.
* Governing document: Trust Deed.
* Easier and cheaper to register than societies and companies.
### Compliance
* Very minimal statutory compliance.
* Annual filing is not mandatory in most states.
* Audit and accounts maintenance advisable but not strictly regulated.
### Cost
* Low registration cost.
* Low ongoing compliance cost.
### Advantages
* Simple structure and easy to manage.
* Ideal for charitable purposes, religious activities.
* Trustees have complete control.
### Disadvantages
* Less transparency.
* Not a separate legal entity (trustees are personally liable).
* Difficult to expand or change structure.
* Limited public credibility.
### Tax Implications
* Can apply for **12A and 80G** exemptions.
* Income of the trust is taxed unless registered and exempted.
---
## 3. **Section 8 Company** (under Companies Act, 2013)
### Registration & Formation
* Registered under **Companies Act, 2013**.
* Requires minimum 2 members (for private) or 7 (for public).
* Approval needed from **Central Government**.
* Governing document: Memorandum & Articles of Association.
* Registered as a **not-for-profit company** with specific charitable objects.
### Compliance
* Highly regulated; follows provisions of Companies Act.
* Mandatory Annual General Meetings (AGM).
* Annual filing with **MCA (Ministry of Corporate Affairs)**.
* Statutory audit mandatory irrespective of turnover.
* Strict governance, board meetings, and compliance norms.
### Cost
* Higher registration fees and professional fees.
* Higher ongoing compliance and audit costs.
### Advantages
* Separate legal entity with perpetual succession.
* More credibility with donors, government, banks.
* Can enter into contracts and own property in company name.
* Limited liability protection to members.
* Can apply for 12A, 80G, and FCRA (if foreign funds involved).
### Disadvantages
* Expensive and complex to form and run.
* Compliance burden is heavy.
* Less flexible than societies or trusts.
### Tax Implications
* Eligible for tax exemptions under 12A and 80G.
* Must comply with stringent reporting to retain exemption.
---
## Summary Table
| Feature | Society | Trust | Section 8 Company |
| ------------------------------ | ------------------------ | ------------------------ | ------------------------------- |
| Legal Entity Status | Yes | No (trustees liable) | Yes |
| Ease of Registration | Easy | Easiest | Complex, requires govt approval |
| Number of Members | Min 7 | Min 2 trustees | Min 2 members |
| Compliance Burden | Moderate | Low | High |
| Audit Requirement | Above threshold | Generally no | Mandatory |
| Tax Exemption | Yes (after registration) | Yes (after registration) | Yes |
| Liability Protection | Limited | None | Limited |
| Credibility | Moderate | Low | High |
| Costs (Registration & Ongoing) | Low to moderate | Low | High |
---
### Recommendations:
* If you want **simple setup** and **low compliance**, go with **Trust**.
* For **membership-based groups** with moderate compliance, **Society** is good.
* For **professional, credible, and scalable operations**, choose **Section 8 Company**.
---
If you want, I can help draft the key documents or explain the registration steps for any of these. Would you like that?
---
## 1. **Society**
### Registration & Formation
* Registered under **Societies Registration Act, 1860** (state-specific rules apply).
* Requires minimum **7 members**.
* Relatively easy and inexpensive to register.
* Governing document: Memorandum of Association and Rules & Regulations.
### Compliance
* Annual General Meetings (AGM) mandatory.
* Annual filing of financials to Registrar of Societies (varies by state).
* Maintenance of minutes book, membership register, and accounts.
* Less stringent reporting requirements compared to companies.
* Audit usually required if income exceeds threshold.
### Cost
* Low initial registration fees.
* Moderate ongoing compliance cost.
### Advantages
* Easy to set up and operate.
* Flexible structure.
* Good for membership-based organizations.
* Accepts donations and can get 12A and 80G tax exemptions (subject to application).
### Disadvantages
* Less credibility compared to Section 8 company.
* Governance can be weak without clear rules.
* No perpetual succession in some states.
* Limited powers compared to companies.
### Tax Implications
* Exemptions under **Sections 12A and 80G** available if registered under Income Tax.
* Subject to scrutiny if funds are misused.
---
## 2. **Trust**
### Registration & Formation
* Registered under **Indian Trusts Act, 1882** (for private trusts) or Public Trust Act applicable in some states for public trusts.
* Minimum 2 trustees.
* Governing document: Trust Deed.
* Easier and cheaper to register than societies and companies.
### Compliance
* Very minimal statutory compliance.
* Annual filing is not mandatory in most states.
* Audit and accounts maintenance advisable but not strictly regulated.
### Cost
* Low registration cost.
* Low ongoing compliance cost.
### Advantages
* Simple structure and easy to manage.
* Ideal for charitable purposes, religious activities.
* Trustees have complete control.
### Disadvantages
* Less transparency.
* Not a separate legal entity (trustees are personally liable).
* Difficult to expand or change structure.
* Limited public credibility.
### Tax Implications
* Can apply for **12A and 80G** exemptions.
* Income of the trust is taxed unless registered and exempted.
---
## 3. **Section 8 Company** (under Companies Act, 2013)
### Registration & Formation
* Registered under **Companies Act, 2013**.
* Requires minimum 2 members (for private) or 7 (for public).
* Approval needed from **Central Government**.
* Governing document: Memorandum & Articles of Association.
* Registered as a **not-for-profit company** with specific charitable objects.
### Compliance
* Highly regulated; follows provisions of Companies Act.
* Mandatory Annual General Meetings (AGM).
* Annual filing with **MCA (Ministry of Corporate Affairs)**.
* Statutory audit mandatory irrespective of turnover.
* Strict governance, board meetings, and compliance norms.
### Cost
* Higher registration fees and professional fees.
* Higher ongoing compliance and audit costs.
### Advantages
* Separate legal entity with perpetual succession.
* More credibility with donors, government, banks.
* Can enter into contracts and own property in company name.
* Limited liability protection to members.
* Can apply for 12A, 80G, and FCRA (if foreign funds involved).
### Disadvantages
* Expensive and complex to form and run.
* Compliance burden is heavy.
* Less flexible than societies or trusts.
### Tax Implications
* Eligible for tax exemptions under 12A and 80G.
* Must comply with stringent reporting to retain exemption.
---
## Summary Table
| Feature | Society | Trust | Section 8 Company |
| ------------------------------ | ------------------------ | ------------------------ | ------------------------------- |
| Legal Entity Status | Yes | No (trustees liable) | Yes |
| Ease of Registration | Easy | Easiest | Complex, requires govt approval |
| Number of Members | Min 7 | Min 2 trustees | Min 2 members |
| Compliance Burden | Moderate | Low | High |
| Audit Requirement | Above threshold | Generally no | Mandatory |
| Tax Exemption | Yes (after registration) | Yes (after registration) | Yes |
| Liability Protection | Limited | None | Limited |
| Credibility | Moderate | Low | High |
| Costs (Registration & Ongoing) | Low to moderate | Low | High |
---
### Recommendations:
* If you want **simple setup** and **low compliance**, go with **Trust**.
* For **membership-based groups** with moderate compliance, **Society** is good.
* For **professional, credible, and scalable operations**, choose **Section 8 Company**.
---
If you want, I can help draft the key documents or explain the registration steps for any of these. Would you like that?
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