Not For Profit/Charitable Organizations

What Is The Difference Between An Ontario And Federal Not For Profit Incorporation?

Pertinent Acts

The Federal Incorporation Act is called the Canada Not-For-Profit Act and may be viewed

https://laws.justice.gc.ca/eng/acts/c-7.75/

The Ontario the current act is the Corporations Act. The Ontario Act has been changed in 2010 to include a Not-For-Profit Corporations Act but it has not yet been implemented.

https://www.ontario.ca/laws/statute/90b16

https://www.ontario.ca/laws/statute/10n15

Want to Know More?

Not For Profit Corporations also knowns as Non Profit Incorporations, Nonshare Corporations, NFP, NPO and NGO Incorporations are set up specifically to enable those who wish to start a business where the business activity is to support the community in a variety of ways or to bring together collectively a group of individuals to engage in a similar cause or campaign.

The most common Non Profit Incorporation is established to bring together individuals for any sporting league, clubs or events. These include sports such as hockey, football, fly fishing, archery and any number of sporting activities.

Another example is to bring individuals together for common causes or group organizations such as a resident’s, professional or trade association.

Social clubs are another example, as yearly festivals such as music, arts, and any number of events can be set up as a not for profit organization.

Service clubs, which support the community, can also be registered as Non Profit Incorporations. Examples are the Rotary and the Lions Club.

Charitable organizations support the community and typically gain funds from the public to achieve and maintain their objectives. Examples of a charity include religious organizations, relief of poverty, advancement of education and many other objects which support the community.

What Are the Differences Between a Registered Charity and a Not For Profit?

Most people believe that you choose one or the other but that isn’t the case. All businesses that are providing support to the community are established as a Not For Profit Incorporation and depending on what your business is doing, it may also be suitable to obtain charitable status in Canada. The charitable status is initialized as part of the formalization of the incorporation and is only available by obtaining approval through Canada Revenue Agency (CRA).

When the incorporation has been completed and wishes to be a registered charity, the Revenue Canada agency requires individuals who wish to set up charitable accounts to go directly through My Business Account with Revenue Canada and answer the most up to date questions to apply for this status.

Object Clauses – Purpose

The object clauses provide an overall view of what the corporation purpose is. When completing an Ontario incorporation, the Province of Ontario has provided a number of available templates for the object clauses and these clauses are available as you submit your application within our website. The Federal Government does not provide any templates. It is recommended you provide 2 to 6 paragraphs of what you are providing to your community.

Charitable Purposes

The charitable purposes or object clauses must be provided within the incorporation documentation whether the set up is being completed as an Ontario or Canada Incorporation.

The Province of Ontario provides a listing of the pre-approved charitable object clauses to choose from if applicable. The Federal or Canadian government requires the individual incorporators to provide their own object clauses within the incorporation documents.

Overall, the charitable organization will fall under one of four different categories of relief of poverty, advancement in education, advancement of religion, promotion of health and generally benefit the community.

Foundations

A foundation is specific to an organization that will take in charitable funds under its umbrella and donate those funds to other charitable organizations in Canada.

Advantages of a Not for Profit Incorporation

Whether you are setting up a profit or nonprofit organization, the corporation provides the opportunity for the business to operate as a separate entity from those who either own or are members to the corporation.

The corporation remains intact over time as members change within the organization. Often with a NotforProfit, there may be a yearly change to members.

A corporation has the ability to operate secondary business names under the corporation. This may be an abbreviation to the full business name, a different name or an acronym for the corporate name. The corporate name cannot start as an acronym or letters and must provide a description within the name of the business activity.

The majority of the members have the power to bind the majority by their agreement.

Disadvantages of Incorporation

A Not for Profit has to operate within the boundaries established by its jurisdiction of incorporation. The corporation is required to abide by its by-laws and object clauses.

The assets of the corporation remain within the corporation after the expenses associated with the operation of the business are distributed. The members or directors of the corporation are not able to take revenues or draws from any revenues above the costs of their expenses and salaries.

Choosing a Corporate Name

The business name for a corporation is required to provide what type of business will be operated. For example, if the business is a religious organization, it is important to provide wording within the business name which is associated with a specific faith or belief.

It is helpful, when available to provide a geographical location for the business as an example, Halton Region Hockey League.

It is important that your business name be understood to be a not for profit.

NUANS Report

A NUANS report is a computerized data search report that provides a listing of similar business names and trademarks to your proposed corporate name. The report does not provide an opinion as to whether the business name is available or will be accepted but simply provides a 6 page generated report of similar names. As part of our service, we will pre-screen the existing business and trademarks to your proposed business name prior to requesting a report.

If a chosen name appears to be in conflict with existing businesses, we will request that you provide a new name to us at no additional cost.

Legal Ending to Your Corporation

A Non Profit or Charitable organization cannot use the legal endings Limited, LTD., Limitee or Ltee. These legal endings are only applicable for profit incorporations.

The legal endings Corporation, Corp., Incorporation, Inc. or Incorporee may be used.

More commonly than not, most Not-For-Profit businesses do not use a legal ending at all or choose wording such as Organization, Society, or Foundation as a legal ending.

Foreign Language in Corporate Name

The information provided throughout the incorporation is required to be provided in English or French. If the business name contains foreign words, this is acceptable, as long as provided in English or French. Occasionally, you may be required to provide an explanation of the words or wording, if not recognized as a dictionary word.

Who Owns a Not For Profit?

A Non Profit or Charitable organization is not owned by any person or persons but these people act in a position of trust and are accountable to the public in general. The government allows individuals the opportunity to exist to the betterment of the community. A for profit business is privately owned and the money can be distributed to the shareholders from its owned corporation. A Not For Profit cannot distribute benefits to individuals including bonuses, earnings or dividends to its members.

The Individuals – Directors/Members

From the beginning of the corporation throughout the time the corporation is active, a minimum of 3 individuals must be listed on the corporation at all times. The individuals must be eighteen years of age and the citizenship of each individual is not requested.

Commonly, the directors are elected each year by a general meeting by members within the corporation. Directors may seek re-election to remain on the board, however if a director wishes to resign, a new director will be required to take that individuals position within the corporation as, at all times, the minimum of 3 persons is required.

Can a Not for Profit Make Money?

Yes, a Non Profit or Charity can earn money for the organization. In many cases, making money is what facilities the organization being able to move forward with its purpose to assist the community. As directors, you are not able to take any funds from the business after expenses for your own personal gain outside of the dedicated salary to each individual.

Taxation of Non-Profit and Charitable Organizations

Just as you would for an individual or a for profit business, the not for profit or charitable organization must file a corporate tax return each year. Under most circumstances, both are exempt from Federal income tax.

It is Important to Maintain the Records of the Corporation Including:

• Accounting records
• Minutes of meetings held with the directors/members of the organization
• Copies of any and all Articles establishing or changing the corporation
• By-laws
• Listing of current and historic directors and members

We are here to assist you and to make the process simple. If you have any questions or are not sure what type of business you operate, please feel free to take a quick moment and either call 1-800-280-1913 or send us a quick message to [email protected]. Alternatively if you don’t see what you would like to do, just reach out to us and we can look at obtaining a quote for a service not listed on the website.

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