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Trust vs Section 8 Company: Which One is Better for NGOs?
🔹 "Hello everyone! Welcome to RR Legal Talks. If you’re planning to start an NGO you might be confused between a Trust and a Section 8 Company. Today, we will compare both so you can choose the best option. Let’s get started!"
1. What is a Trust?
📌 A Trust is a legal entity created to manage assets or funds for a charitable purpose.
📌 It is governed by the Indian Trusts Act, 1882) and state laws
📌 Requires at least two trustees to establish.
✅ Best for:
• Religious and Charitable Institutions
• Family-run Philanthropic Activities
• Schools, Hospitals, and Orphanages
2. What is a Section 8 Company?
📌 A Section 8 Company is a non-profit organization registered under the Companies Act, 2013.
📌 It is a corporate entity with directors and strict compliance rules.
📌 Requires at least 2 directors and 2 shareholders.
✅ Best for:
• NGOs requiring Corporate Structure
• Organizations Seeking Foreign Donations (FCRA)
• Large-Scale Social Enterprises
3. Key Differences Between a Trust & Section 8 Company
Feature Trust Section 8 Company
Registration Act Indian Trusts Act, 1882 Companies Act, 2013
Minimum Members 2 Trustees 2 Directors & 2 Shareholders
Legal Status Less Structured Well-Regulated
Governance Managed by Trustees Managed by Board of Directors
Tax Benefits 80G & 12A (if registered) Easier tax exemptions
Foreign Donations (FCRA) Allowed if registered under FCRA Easier to get FCRA approvals
Credibility Moderate High due to strict compliance
Ease of Registration Easy & Quick Takes little time for obtaining approvals from MCA
4. Which One Should You Choose?
🔸 If you are running a family-run charity, religious trust, or small-scale NGO, go for a Trust.
🔸 If you want a professional, corporate-style governance structure and easy funding options, choose a Section 8 Company.
5. Conclusion
"That’s it for today’s video! Hope this helps you make the right decision. If you found this useful, don't forget to LIKE, SHARE, and SUBSCRIBE for more legal and business insights. See you in the next video!"
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