Understand the difference between Trust, Society and Section 8 Company

September 26, 2023
Startup/ Registration

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Difference between Trust Section 8 Company and Society

In the charitable realm, there are three distinctive organization structures Trusts, Societies, and Section 8 Companies. Although these organizations have shared the common goal of societal welfare. However, these organizations have distinctive management structures, operational work, and legal frameworks. In the current article, we will explore the key Difference between Trust & Section 8 Company & Societies.

Table of Content

Meaning of Trust, Society, and Section 8 Company
Difference between Trust, Society, and Section 8 Company
Final Words

Meaning of Society and Section 8 Company or Trust

Here is general overview of the Society and Section 8 Company or Trust explains herein:

Society: It is an association created by a group of persons with common purposes. Such as education; promoting culture, scientific, charitable, literary or social activities. Societies are formed under the provisions of the Societies Registration Act,1860. It provides the provisions related to its formation, functions, and registration of the society.

The society is operated through a structured management system, which is governed by an executive committee elected by the members. The activities and operations of a society are mainly given by its bylaws. That provides the governance framework, rules for decision-making, the company’s goals, and membership criteria.

Section 8 Companies: It is also known as a Section 8 non-profit company. A section 8 company is a legal framework provided as per provisions of the Companies Act, 2013. It is for encouraging and promoting certain activities such as scientific, artistic, educational, charitable, religious, or social welfare. The primary motive of this company is to facilitate performances, which contribute towards the betterment of society and the general public.

Trust: It is a legal entity in which a person (who is known as a Trustee) holds and manages all assets for the well-being of another individual or group of individuals (those are known as Beneficiaries). A person who makes the trust is known as the “grantor”. Trusts have been set up for several purposes such as asset protection, estate planning, charitable giving, etc.

Trusts can take any form; each has its features and benefits like charitable trusts, revocable living trusts, testamentary trusts, and irrevocable trusts. Trusts provide separate legal ownership and managing assets from beneficial ownership, which can help to offer benefits. Such as Privacy, tax planning, and structured distribution of assets over time.

Difference between Trust, Society, and Section 8 Company

Here represents the tabular form of difference between Trust, Society and Section 8 Company are as:

S. No.	Particulars	Trust	Society	Section 8 Company
1.	Formation	Need a trust deed	Need rules & regulations and a memorandum	Needs a MOA & AOA
2.	Primary Purpose	Religious, educational, charitable, etc.	Educational, cultural, social, etc.	Philanthropic, educational, Charitable.
3.	Governing Bodies	Trustees	Managing Committee	Board of Directors
4.	Governing Laws	The Indian Trusts Act, 1882	The Societies Registration Act, 1860	The Companies Act, 2013
5.	Assets Ownership	In the name of trustees	On society’s name	Name of the Company
6.	Registration	It must be registered with local authorities	Registrar of Societies	Need a license from the RoC
7.	Benefit of tax	They are eligible for tax exemptions as per section 11 of the Income Tax Act, 1961	It is eligible for tax exemptions as per section 12A of the Income Tax Act, 1961	Eligible for tax exemptions as per section 12A of the Act, 1961
8.	Compliance needs	They are flexible in operations	Needs regular meetings, annual reports, and accounts	Compliance as per the Companies Act, 2013 like income tax filings
9.	Liability of members/ directors/ trustees	Trustees Limited liability	Members limited liability	Limited liability of members
10.	Dissolution	It can be dissolved according to the trust deed	Dissolved as per rules and regulations	Dissolved according to the provisions of the Companies Act, 2013

Final Words

In conclusion, the article has provided the finest understanding of the three different charitable institutions. In which, one can select for the well-being of the society or general public. The selection can be done with your mission, and make sure to create positive change. These three different charitable institutions are equally important to each other. This entire legal framework provides its distinct benefits and limitations. The selection depends on the particular goals, governance, and activities of your company.

CS Urvashi Jain (M.COM, LLB, ACS)

CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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