Establishing an organisation requires many prerequisites. To start a school, you have to first choose between a trust or a society. If you are confused between the two and stuck at this stage of planning, this blog is for you! We will discuss the advantages and disadvantages in the ‘Trust vs Society’ debate, and help you decide what’s best for your organisation.
Definition of Trust and Society
Some forms of organisations are created to provide services to their members rather than merely make a profit. Two such organisations are trusts and societies. A trust is a legal bond between two parties where one party holds property for another in complete confidence. In comparison, a society is an association of parties who jointly fulfil a common purpose mentioned under The Indian Societies Registration Act of 1860.
If you are someone who wants to put aside a portion of your earnings for a special cause or for the welfare of the society, here are some advantages and disadvantages of a charitable trust.
Advantages of a Trust
- Easy set-up: Setting up does not require many people, a minimum of two people will also suffice
- Privacy and control: Privacy and control of the trust remain intact while reducing misuse of funds significantly
- Assets utilisation: It is easy to release assets partially over a period of time
- Cost-saving: It reduces the burden of tax amount and is a good option for cost-saving
- Time-saving: There are no tedious processes involved to reorient the arrangement of the board members. Further, it doesn’t require any prior invitation to the members
Disadvantages of a Trust
- Less autonomy: A charity commissioner has the authority to intervene in decision making
- Rigidity: A trust is formed strictly for charity purposes
- Complexity: Difficulty in acquiring loans.
- Less transparency: It is difficult to maintain complete transparency on the governance of the trust
- Autocracy: Usually a trust is controlled by just one person. Hence, democratic control doesn’t exist
Now let us look at what a society is and how it works. It refers to a group of individuals collaborating for a common pursuit. It aims to support scholarly, charitable or scientific work.
Advantages of a Society
- Beyond charity: It goes beyond charitable purposes like political, educational, fund-raising and promotional
- Shared profits and liabilities: Liabilities are shared among the members as are the profits
- Seamless formation: Establishing is a simple process as every member shares a common goal. It can be set up simply by the voluntary consent of 10 adult members.
- Going concern concept: Just like any business entity, a society does not get dissolved due to unforeseen circumstantial changes like the retirement or death of a society member
- Democracy: There’s a democratic control where decisions are taken by casting votes
Disadvantages of a Society
- Lack of confidentiality: It lacks confidentiality in administrative and transactional processes
- Lack of experience: People with minimal business acumen and lack of experience can also run a society
- Lack of interest: There’s a possibility that the members may lose interest and detour from the common goal
- Lack of transparency: Generally run in an informal manner, hence it is hard to keep a track of financial and non-financial processes
A trust or a society, whichever you choose, make sure it is the perfect choice for your ideal cause and helps you reach your desired goal. If you are still wondering whether to build a trust or a society for the school, we would be glad to assist you at every step. For more information, check out www.nextschool.in