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March 27, 2014

CAN BUSINESS AND CHARITABLE ACTIVITY BE DONE TOGETHER

QUESTION-

 From-Husain


Hello,

I am wondering if you can help me with my following query. I have been living abroad for a number of years but I am still an Indian national. I am planning to return to India very soon for good and establish a business of my own. What I initially plan to do is to invest in properties and then later on in stocks and then I aim to start my own microfinancing firm. Could you please let me know what type of company/firm I should seek to register with a mention of the time and costs involved.

By the way, I have plans to establish a non profit educational / charitable society as well. Would I need to register something for that separately or I can think of first an umbrella firm / society under which I can accommodate my profitable and charity activities?

Thanks
Husain


ANSWER:

Hi Husain,

Thanks for posting your query, please get your answers below:

1. Initially you can start you investment activity in your Individual name and when you start your business you can open a Company, LLP or a Partnership Firm.



2. To start a Microfinance Business, you will have to decide whether motive of the business is Profit or for Non-Profit. If the motive is for Not earning profit you can register it in 3 forms viz:
  • Society
  • Trust or
  • Section 25 company
If the motive is to earn profit you can start in 2 forms:
  • Cooperative Society
  • NBFC
Out of the 5 types, NBFC form need most time and is costly. But it offers best way to start the Microfinance business due to better regulations and guidelines.

3. Now since your motive is to earn profit, you cannot do Charitable and Profitable work together. If you still want to do these work together you cannot claim the benefits available to NGO's i.e. Income Tax Exemption, Government grants etc. It would be better for Charitable activity you register a Society, Trust or Section 25 company. And for Microfinance Firm you choose between Cooperative Society and NBFC.


Hope this helps you feel free to contact further for any query.


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