HOW TO HAVE YOUR START-UP
Important steps to get started
1. Check the feasibility of your idea.
2. Have your business plan ready.
3. Choose the right business structure.
4. Look for funds.
5. Register in Government Schemes
6. Intellectual properties such as Trademark and Patents
7. Build a good digital presence. I
8. Get a good workspace.
Right Business Structure
Not for profit organizations
Not for profit organization is an organisation that does not earn profit for self consumption. All the money earned by not for profit organization is used in achieving organization’s objectives.
The purpose of not profit organisation in India is not to earn profit rather it serves to the society for any social cause to help people other than the need of earning.
There are three common forms of NGOs— Trust, Society and Section 8 Company.
Which one should you choose?
Section-8 Company
- The primary purpose of registering a company as a Section 8 Company is to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports research, etc.
- To incorporate a Section 8 Company, a minimum of two directors are required. Also, there is no requirement of minimum paid-up capital in the case of Section 8 Company.
- In India it is registered under the Section 8 Company of the Company Act,2013.
- The profits of this company, if there are any, are applied towards promoting the objectives of the company and not distributed as dividends to its shareholders.
- A Section 8 Company is the same as the Section 25 Company under the old Companies Act, 1956. As per the new Companies Act of 2013, Section 25 has now become Section 8.
Documents Required
- Think of the Name. The name end with the words like Foundation, forum, association, federation, chambers, council, electoral trust. Etc.
- Digital Signature Certificate
- Director Identification Number (DIN)
- Basic KYC details of Directors or Members
- A place to act as a registered office
- Memorandum of Association and Articles of Association
- A write-up on the company
- Declaration by CS/CA/CWA in practice
- An estimate of the future annual income and expenditure for next three years
Steps for Incorporation
STEP 1
We obtain the DSC for the proposed Directors and then if the proposed Directors do not have DIN the apply by Filling form DIR 3.
STEP 2
To apply for a company name through Form SPICE+ on MCA. There is also an option to check the availability names in the website.
Either one can reserve the name first then do the incorporation or directly go for incorporation.
SETP 3
After the name is sorted we need to file the Form SPICE+ along with all the required documents.
STEP 4
After submitting the form we wait for the department to revert.
STEP 5
If no query is there from the department side then the company is formed and Certificate of incorporation is issued.
Trust
As per the Indian Trust Act 1882, a Trust is an arrangement where the owner (trustor) transfers the property to someone else (trustee) for the benefit of a third person (beneficiary).
Such a property is transferred by the trustor to the trustee along with a proclamation that the trustee should hold the property for the beneficiaries of the Trust.
There are two types of trusts in India: private trusts and public trusts.
While private trusts are governed by the Indian trusts Act, 1882, public trusts are divided into charitable and religious trusts.
What are Private Trust ?
A Private trust is constituted for the benefit of 1 or more individuals who are, or within a given time may be, definitely ascertained.
What Documents are Required
- Proposed name of the trust
- KYC documents of Trustor & Trustee
- Total number of trustees.
- Address Proof of Registered Office
- Objective of the Trust Deed
- Trust Deed on Proper Stamp Value
- Rules and regulations to be strictly followed by the Trust
- Presence of settler and 2 witnesses at the time of registration of Trust
Steps for Incorporation
- The application should be made to the official having jurisdiction over the region in which the trust is sought to be registered.
- After providing details regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc.,
- The applicant has to affix a court fee stamp to the form and pay a very nominal registration fee, depending on the value of the trust property.
- The application form should be signed by the applicant before the regional officer or superintendent of the regional office.
- The application form should be submitted along with trust deed.
- Affidavit and consent letter.
- After submitting the documents it takes 10-15 day to obtain the registration certificate.
Society
A society is an association of persons united together by mutual consent to deliberate, determine and act jointly for some common purpose.
The Societies Registration Act, 1860 lays down the procedure for society registration and operation in India.
Registration can be done either at the state level (at the office of the Registrar of Societies) or at the district level (at the office of the District Magistrate or the local office of the Registrar of Societies).
However the Societies Registration Act, 1860 has been adopted by most of the State Governments with/without further amendments.
Society Registration Purposes
A Society can be formed for the promotion of literature, science or fine arts or the diffusion of useful knowledge or political education or for charitable purposes like:
> Grant of charitable assistance.
> Creation of Military Orphan funds.
> Promotion of Science.
> Promotion of Literature.
> Promotion of Fine Arts.
> Promotion or Instruction or Diffusion of useful Knowledge.
> Diffusion of Political Education.
>Foundation or maintenance of libraries or reading rooms.
> Foundation or maintenance of Public Museum or Galleries.
In addition to the above purposes a Society can also be registered for other purposes based on the amendment that has been enacted to the Societies Act, 1860 by the concerned State Government.
Society Registration in India
A Society can be formed by a minimum of seven or more persons.
Besides persons from India, foreigners, companies and other registered societies can subscribe to the Memorandum of a society. Like Partnership Firms, Societies can also be registered or unregistered. However, only registered Societies can hold vested properties and/or have a suit filed by or against the Society.
Name Selection
While choosing a name for the society, it is important to remember that similar or identical name of an existing registered society is not permitted. Also the name must also not suggest patronage of the Government of India or any State Government or attract the provisions of Emblem and Names Act, 1950.
Memorandum of a Society
The Memorandum of the Society and the Rules and Regulations of the Society must then be signed by each of the founding members, witnessed by an Oath Commissioner, Notary Public, Gazetted Officer, Advocate, Chartered Accountant or Magistrate 1st Class with their official stamp and complete address.
Steps for Incorporation
The following documents are needed:
> Covering letter signed by all founding members
> Memorandum of Association
> Rules and Regulations of the Society
> Affidavit sworn by the President or Secretary of the Society stating relationship between the subscribers.
> Address proof for the registered office
The signed Memorandum and Rules and Regulations must then be filed with the concerned Registrar of Societies in the State with the prescribed fee.
If the Registrar is satisfied with application for Society Registration, the Registrar would certify to deem the Society to be registered.
After Incorporation what to do?
Apply for Licenses
12A and 80G Registrations
- Under Income tax Act
- Income tax exemption
FCRA Registration
- Ministry of Home Affairs
- Foreign Contribution Regulation Act, 2010
Basic Requirements for 12A and 80G Registrations
- Only NGOs are allowed for this provision.
- Donation as permitted u/s 80G is allowed for tax exemption.
- N G 0 assets should ONLY be used for charitable purposes.
- NGOs should correctly maintain Books of Account of its expenditures and receipts.
Registration can be cancelled in these cases:
- If NGO does not runs the promotion/benefit of religion/community/caste.
- If NGO receives funds/gifts from Political Parties/International sources.
- NGO works as a commercial profit based unit.
- ANY misuse of the 80G provisions.
What is the Tax Exemption Limit on donation?
There is a limit on how much money can be exempted from the Income Tax:•
If the amount of deduction to a charitable organization or trust is more than 10% of the gross total Income computed under the Act (as reduced by income on which income tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of 10% of Gross Total Income shall not qualify for deduction under section 80G.•
The persons or organizations who donate under section 80G gets a deduction of 50% from their taxable Income.
Benefits of Registration
Foreign Contribution and Regulation Act 2010 (FCRA)
The FCRA was enacted with the primary purpose of regulating the inflow of foreign contributions and ensuring that the received foreign contributions are not utilized for illegal purposes.
All charitable organizations in India receiving foreign contributions come under the purview of this Act.
Over the last few years, the Home Ministry has been scrutinizing the flow of foreign funds to all charitable organizations in India and the Ministry has also cancelled the licenses of over 8000 charitable organizations due to non-compliance with the reporting requirements stipulated under the Act.
Eligibility criteria
An association should be registered either under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or under Section 8 of the Companies Act, 2013;
An association normally be in existence for at least 3 years and has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilized
An association should have spent at least Rs.10,00,000/- over the last 3 years on its aims and objects, excluding administrative expenditure.
Statements of Income & Expenditure, duly audited by CA, for last 3 years are to be submitted to substantiate that it meets the financial parameter.
Filing of CSR-1 with MCA for CSR funding
The Government of India has come out with a new registration for NGOs who are undertaking or desirous of undertaking CSR activities on behalf of the companies.
Such registration is to be taken by filing Form CSR-1 electronically on the MCA portal. This registration can be taken by NGOs with effect from April 1, 2021.
Form CSR-1 shall be signed and submitted electronically and verified by a practising CA or CS or Cost Accountant.
On application, the MCA portal will automatically generate a unique CSR registration number
CSR funding will be available only to those NGOs that are registered with MCA.
Documents for filing Form CSR-1.
1. Copy of PAN Card of the NGO
2. Mail ID and Mobile Number
3. Details of Governing Body Members
4. Copy of Registration Certificate
5. Digital Signature of the Authorised Person with his PAN Number
Author Bio
Sir a m a man from Tanzania aged 65 seeking for assistance to set up an NGO to work in my country