Can Section 8 company make profit?
Can Section 8 company make profit?
Section 8 companies can make profit in a number of ways even though the owners are not required to share any profits with the shareholders. These businesses cannot give their members profits or dividends because they are registered as non-profit organisations. These companies are established to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any other object.
Operation of a Section 8 Company
Forming a Section 8 company involves obtaining a Certificate of Incorporation from the Ministry of Corporate Affairs (MCA). After the company is incorporated, the directors must draft a Memorandum of Association (MoA) and Articles of Association (AoA). The MoA outlines the company’s objectives and the AoA outlines the company’s regulations. The company must also have a minimum of three directors and a minimum of seven members.
Once incorporated, the company must obtain an 80G certificate from the Income Tax Department. This is a certificate of exemption from income tax and allows the company to receive donations without any tax liability. The company can also receive funding from other organisations or individuals. It must maintain proper books of accounts and file annual returns with the MCA. It must also abide by the rules and regulations of the Companies Act 2013 and comply with the provisions of the Foreign Contribution Regulation Act (FCRA).
To ensure that the company remains a non-profit, it must ensure that no part of its income is distributed as dividends to its members. The company must also not acquire any asset or property for the benefit of its members. However, the company may use its funds to help those in need and promote its objectives.
Profit making for Section 8 Companies
Section 8 companies can make a profit. But the real question is, how? Section 8 companies generally receive government funding through the Section 8 housing voucher program, in which households receive assistance from the government to pay for housing costs. While these companies are typically not-for-profit, there are ways for them to make money.
- Donations and Funding: Section 8 companies can seek donations from individuals and organisations and use the funds to further their mission. Section 8 companies can pursue projects and generate profits through donations and grants.
- Trading: Section 8 companies can engage in trading activities, such as buying and selling goods, to make profits. This is a beneficial method for organisations focused on helping others, as it allows them to use the profits from their trading activities to fund their charitable activities.
- Services: Section 8 companies can also provide services to their members, clients or the public, such as educational workshops or courses, and charge a fee. This is especially useful for educational and research organisations, as they can use the money generated to fund their activities.
- Investment: Section 8 companies can also invest in various types of assets, such as stocks, bonds, or real estate, to generate profits. This is an excellent way for organisations to use their funds to generate a steady income stream.
In conclusion, section 8 companies can indeed make a profit. By increasing the number of people in their housing units, providing additional services, and investing their funds, these companies can generate more income than they receive from the government. This income can then be used to expand their services and improve the quality of life for their tenants.
