How to Register Social Enterprises in India | Actax India

How to Register Social Enterprises in India: 8 Step Handbook

Have you ever thought about owning your business venture where you earn profits as well as promote positive change in society?

If that is the case, then it may be of interest to start up a social enterprise. But what exactly is meant by the term ‘Social Enterprise’ and how can one go about registering a Social Enterprise in India?

Okay, let’s start and take a tour of how to register social enterprises in India!

Handbook To Register Social Enterprise in India

What Are Social Enterprises?

Social Enterprise Line Diagram
Source – Social Impact Architects

A social enterprise is a business venture that is designed to bring about positive social change as well as make a profit. It has some characteristics of a normal for-profit business but also has features of a non-profit organization.

It is important to note that social enterprises, especially those considering Company Registration, can vary enormously in terms of the type of business they are as well as their size.

They could emphasize creating jobs for economically disadvantaged groups, environmental management, or efficient and cheap healthcare needs. The key is that these companies must have a clear social mission in their business model to be successful. 

An Update –
Recently, SEBI has broadened the scope of activities recognized under the Social Enterprise framework as an initiative to give boost to address diverse societal challenges in India.
Source – economic times

When Should You Register a Social Enterprise in India?

If you have a question, “Do I need to register my social enterprise?”
Then the answer is: Well, it depends.

So if you are just starting with a business, and you are just testing the waters on whether your idea would work or not, then you don’t necessarily have to register yet.

However, this changes as your business expands and you deal with more money, employees, or partnerships, and social registration becomes inevitable. 

Here are some signs that it’s time to register your social enterprise:

  1. You’re seeking funding from investors or applying for grants.
  2. You want to open a business bank account.
  3. You’re hiring employees.
  4. You need to enter into formal contracts with suppliers or customers.
  5. You want to establish credibility and trust with stakeholders.

Registering your social enterprise not only helps you comply with legal requirements but also gives you a solid foundation for growth and impact.

Now, let’s get to the main event – how to register your social enterprise in India!

8 Step Process To Register Social Enterprise in India - Definitive Guide

Step 1: Choose Your Legal Structure

The first decision you’ll need to make is what legal structure best fits your social registration enterprise. In India, you have several options:

  1. Section 8 Company: This is a business form that only applies to organizations whose main aim is to support charitable or social causes.
  2. Private Limited Company: It has become the preferred strategy for any social enterprise desirous of tapping investors and growing in size.
  3. Limited Liability Partnership (LLP): Provides flexibility on the part of the social enterprise and limited liability, helpful for novice and small businesses.
  4. Trust or Society: These are the conventional models of non-profit organizations, but they may not be flexible for the registered social enterprise business models that are expected to generate income. 

Each structure has its pros and cons, so take some time to research and consult with a legal expert to determine which one aligns best with your goals.

Step 2: Name Your Social Enterprise

Once you have settled on your structure, it is now decision-making time about what name your social enterprise will bear.

Ensure that it is not found anywhere else and can be easily remembered, and represents your mission statement. To get this done, you will have to search for the availability of the name through the Ministry of Corporate Affairs (MCA) website. You have to follow the naming best practices for the company as guided by MCA on their website. 

Pro tip: Don’t forget to have several nicknames prepared if the first one you decided upon is already present on the portal!

Step 3: Obtain a Digital Signature Certificate (DSC)

To submit documents online to the government, you have to apply for a Digital Signature Certificate. This can be acquired from authorized agencies, for instance, e-Mudhra or n-Code Solutions 

Step 4: Get a Director Identification Number (DIN)

In case of any registration of a business entity, each director will require a DIN. This one has to be done online via the MCA portal.

Step 5: Prepare and File Incorporation Documents

This is where things get a bit paperwork-heavy, but don’t worry – we’ll break it down for you:

For a Section 8 Company:

  1. Form INC-12 (application for grant of license)
  2. Form INC-13 (memorandum of association)
  3. Form INC-14 (articles of association)
  4. Form INC-15 (declaration by each person making the application)

For a Private Limited Company:

  1. Form SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus)
  2. Memorandum of Association (MOA)
  3. Articles of Association (AOA)

For an LLP:

  1. Form FiLLiP (Form for incorporation of Limited Liability Partnership)
  2. LLP Agreement

For a Trust or Society:

  1. Trust Deed or Memorandum of Association
  2. Rules and Regulations

Make sure to draft these documents carefully, clearly stating your social mission and how you plan to achieve it.

Step 6: Submit Your Application

File your incorporation documents along with the required fees through the MCA portal (for companies and LLPs) or with the relevant state authority (for trusts and societies).

Step 7: Obtain a Certificate of Incorporation

If your application is approved, you’ll receive a Certificate of Incorporation.

Congratulations – your social enterprise is now officially registered!

Step 8: Post-Registration Compliance

Your journey doesn’t end with registration. There are a few more things you’ll need to do:

  1. Apply for a Permanent Account Number (PAN) and Tax Deduction Account Number (TAN)
  2. Open a bank account in your social enterprise’s name
  3. Register for Goods and Services Tax (GST) if applicable
  4. Comply with annual filing requirements. If you are registered as a private limited company, get the expert checklist of annual mandatory compliances for it. 

Bonus Tips for Success

  1. Seek expert help: The registration process can be complex, so don’t hesitate to consult with lawyers, chartered accountants, or company secretaries who specialize in social enterprises.
  2. Network with other social entrepreneurs: Join communities like the National Association of Registered Social Enterprises, India (NASE) to connect with like-minded individuals and learn from their experiences.
  3. Explore funding options: Look into social impact investors, crowdfunding platforms, and government schemes that support social enterprises.
  4. Measure your impact: Develop clear metrics to track and demonstrate your social or environmental impact alongside your financial performance.
  5. Stay true to your mission: As you grow, always keep your social mission at the forefront of your decision-making.

Wrapping Up

Registering a social enterprise in India might seem like a daunting task, but it’s an important step in turning your vision for positive change into reality. By following this guide and seeking support when needed, you’ll be well on your way to creating a legally recognized entity that can make a lasting impact on society.

Remember, the world needs more passionate individuals like you who are willing to tackle social and environmental challenges through innovative business models. So, take that leap, register your social enterprise, and start making a difference!

Are you ready to embark on your social entrepreneurship journey? What social issue are you most passionate about addressing through your venture? Share your thoughts and experiences in the comments below – let’s inspire each other to create positive change!

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