When deciding on the best organizational structure for your NGO, consider the following key factors:
1. Number of Members Involved
- If fewer than 7 members are involved, a Trust or Section 8 Company is preferable.
- If at least 7 members are involved, registering as a Society is the best option.
- Example: Bar Associations, Trade Associations, and Resident Welfare Associations often register as Societies.
2. Statutory Compliances
- Section 8 Company: Requires strict annual financial statements, audits, and filings.
- Society: Moderate compliance, including annual reports and financial statements.
- Trust: No strict annual compliance but accounts must be maintained.
3. Governing Body
- Trust: Governed by the Indian Trusts Act, 1882 (private trusts) or state laws (public trusts). No central regulatory authority.
- Society: Governed by the Societies Registration Act, 1860. Requires renewal every five years.
- Section 8 Company: Governed by the Companies Act, 2013 under the strict supervision of the Registrar of Companies.
4. Privacy & Confidentiality
- Trusts provide better privacy and confidentiality of business data.
- Societies and Section 8 Companies have publicly available financial data.
5. Risk of Internal Politics
- If internal conflicts are a concern, a Trust or Section 8 Company is preferable over a Society, which requires collective decision-making.
6. Fundraising Capabilities
- Section 8 Companies can raise funds through public donations and capital investments.
- Trusts and Societies have limited fundraising capabilities compared to Section 8 Companies.
7. Control & Management
- Trusts and Section 8 Companies allow founders to maintain control.
- Societies operate through an elected governing body, reducing individual control.
8. Cost of Registration
- Trust: Least expensive to register.
- Society: Moderate cost.
- Section 8 Company: Highest cost due to stricter compliance and registration fees.
9. Ideal Structure Based on Purpose
- Trust: Suitable for religious organizations, charitable institutions, schools, and hospitals.
- Society: Ideal for clubs, research institutions, and welfare associations.
- Section 8 Company: Best for NGOs requiring structured governance and large-scale funding.