Introduction:-
Starting a microfinance business is a noble endeavor that aims to provide financial services to underserved communities. When it comes to registering your microfinance company, one option that stands out is choosing Section 8 of the Companies Act, which is specifically designed for non-profit organizations. In this article, we will explore the benefits of opting for Section 8 for your microfinance business registration.
1.Legal Structure for Non-Profit Organizations
Section 8 of the Companies Act, 2013, is crafted to encourage the establishment of companies for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other useful object. This makes it an ideal choice for microfinance institutions, which primarily operate with a social welfare agenda.
2. Tax Exemptions and Benefits
One of the significant advantages of registering under Section 8 is the eligibility for tax exemptions. Microfinance institutions that operate under Section 8 are generally exempted from income tax, which means that the profits earned are reinvested back into the organization for further development and benefit of the target communities.
3. Credibility and Trustworthiness
Registering your microfinance business under Section 8 lends it a higher degree of credibility and trustworthiness in the eyes of stakeholders, including investors, donors, and clients. This can be crucial in attracting funding and partnerships with government agencies, NGOs, and other financial institutions.
4. Access to Grants and Funding
Microfinance institutions registered under Section 8 company are often eligible for various grants and funding opportunities provided by government agencies, international organizations, and philanthropic foundations. This can significantly enhance the financial sustainability and outreach of your microfinance business.
6. Limited Liability Protection
Just like any other company registered under the Companies Act, a microfinance institution under Section 8 offers limited liability protection to its members. This means that the personal assets of the members are separate from the assets of the company, providing a layer of security in case of financial liabilities.
7. Perpetual Succession
A microfinance business registered under Section 8 enjoys the benefit of perpetual succession. This means that the company's existence is not affected by the changes in its membership or management. It can continue to operate irrespective of changes in its composition.
8. Increased Opportunities for Collaboration
Being registered under Section 8 opens up doors for collaboration with other non-profit organizations, government agencies, and international institutions. This can lead to valuable partnerships that can amplify the impact of your microfinance business and broaden its reach.
Conclusion:-
Choosing Section 8 microfinance company registration offers a range of benefits that can significantly contribute to the success and sustainability of your organization. From tax exemptions to enhanced credibility and access to funding, this legal structure provides a solid foundation for microfinance institutions with a social welfare agenda.
By opting for Section 8, you not only create a legally sound framework for your microfinance business but also demonstrate a commitment to making a positive impact on the communities you serve.