What is the difference between a Not For Profit and a Charity?
Originally Published: Dec 18, 2019
A Not For Profit organization has many also known as (AKA) names, including NFP, NPO, NGO, Not-For-Profit, NonProfit, and NonShare. These words are all common terminologies for the same topic matter for a corporation without share capital.
The Not For Profit and Charitable incorporations both begin as a Not For Profit organization. The charitable status is only available to those corporations where the object or purpose clauses of the corporation are deemed to be a charitable organization. The Canada Revenue Agency ultimately considers those organizations who apply for Charitable status in Canada and determines whether the corporation is considered charitable and if so, the corporation is able to obtain a charitable tax number to provide donation tax receipts to those who provide financial support to the organization.
In the simplest terms, Not For Profit organizations provide to the community as a public benefit, but its focus is not on obtaining donations to support those endeavours. With a charitable corporation, much of the focus is to gain financial donations to support the endeavours.
Our team at Ontario Business Central assists individuals who wish to start a business as either a Not For Profit or Charitable Organization for both the Provincial incorporations in Ontario and the Federal Incorporations for Canada. We hope you find this information a beneficial resource.
We are able to assist you to complete either the Ontario or Federal Not For Profit or Charitable organization, and our staff are available to answer any additional questions you may have related to this topic.
What is a Not For Profit?
A Not For Profit corporation is incorporated to the benefit of a community and is a separate entity to those who are directors or members of the corporation. The directors or members who oversee the corporation do so for the benefit of the community and not for the benefit of themselves as individuals. These individuals do not own the corporation but work for and by the corporation. A Not For Profit organization cannot apply for the charitable tax credit with Revenue Canada.
Taxation
The corporation will be required to file a T2 return within 6 months of the fiscal year end and is generally exempt from paying income tax unless the corporation owns property and has capital gains from that ownership.
GST/HST
The Not For Profit corporation is required to pay GST or HST on purchases made on behalf of the corporation and may claim a partial rebate on GST or HST paid out.
Types of Not For Profit objects are as follows
- Associations – professional, trade, ratepayers, residents, merchants
- Athletic, Hobby and Sports Organizations – golf, curling, health club, skating
- Social clubs/social nature – meetup, flying clubs, yacht clubs, fraternity clubs
- Service clubs – Elks Canada, Kinsmen, Lions
- Arts – dance, music literary, photography, theatre
- Community – Association, Centre, Club
- Conservation, Ethnic, Historical, Lobbying and Research and Scientific
What is a Charitable Organization?
A Charitable Organization is an organization where the objectives of the corporation is to support the community and have the ability to take in donations and provide tax receipts to those who provide financial contribution. The charity must spend a minimum amount through its own charitable activities or as gifts made to qualified donees. A qualified donee, as described by Revenue Canada, is as follows: https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/charities-giving-glossary.html#qualdonee.
Types of a Charitable Organization purposes are as follows
- Relief from poverty
- International development – health, drinking water, agriculture, disaster relief
- Advancement of Religion
- Advancement of Education
- Private Foundations – to receive funding and provide to other charitable organizations
- Services for seniors
- Programs for physically or mentally disabled
- Animal shelters
- Libraries
- Promotion of health
- Preservation of the environment
- The arts
- Community centres, immigrant services, literacy and employment training
The Not For Profit incorporation is approved by the jurisdiction in which you incorporate. When the incorporation has been approved, there is a secondary process to gain a charitable tax number through Revenue Canada. When the charitable status has been approved, the Federal Government will provide the charitable tax number to the organization and, at that point, the organization can take in funding and provide the official tax receipts for the financial contributions.
Taxation
A Charitable Organization must file an annual information return (Form T3010) within 6 months of the corporations fiscal year end and is exempt from paying any income tax.
GST/HST
The organization must pay GST/HST on purchased goods and may claim a partial rebate on purchases. Most supplies made by charities are exempt.
Ontario Business Central has been assisting clients to register their Not for Profit or Charitable organizations since 1992. If you would like to proceed, see the links below:
Order an Ontario Not For Profit / Charitable Incorporation
Order a Federal Not For Profit / Charitable Incorporation
If you would like our assistance or have further questions to ask, please feel free to reach out to us directly.
inquiries@ontariobusinesscentral.ca
Toll-Free: 1-800-280-1913
Local: 1-416-599-9009
Fax: 1-866-294-4363
Office Hours: 9:00am – 5:00pm
Monday – Friday E.S.T.
Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.
