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TYPES OF NON-PROFIT ENTITIES IN CANADA
If you are planning to initiate an organization in the province of Ontario with the goal of advancing a non-profit cause, it is important to first understand what business vehicles are available to you and what regulations and compliance you must adhere to. In Canada, there are two main types of non-profit entities: charities and not-for-profit organizations.
CHARITIES
To create a charity, the business entity must be used to progress one or more of the following goals:
- The relief of poverty.
- The advancement of religion or education.
- Any other objective that benefits society. Examples of this include the protection of the environment or the promotion of health care.
In Ontario, there is no requirement to incorporate a charity prior to progressing one or more of the above-mentioned goals. If your charity plans to issue donation receipts, the charity must be registered with the Canada Revenue Agency and the charity must obtain a charitable registration number.
NOT-FOR-PROFIT ORGANIZATIONS
A not-for-profit organization is an organization, association, society, or club that operates without a view for profit. Examples of not-for-profit organizations include sporting leagues, churches, and schools. If you plan to carry out business as a not-for-profit organization, you cannot hold yourself out to be a charity. In Ontario, not-for-profit organizations are not permitted to issue donation receipts. If a not-for-profit organization wishes to issue donation receipts, it must register for charitable status. In Canada, the Income Tax Act imposes strict requirements that must be met prior to issuing charity status to a not-for-profit organization. An organization can only operate as a not-for-profit or a charity, it cannot operate as both.
HOW WE WILL HELP
If you are planning on starting a not-for-profit organization or charity, our business law team has the experience and knowledge to advise you throughout the entity formation process. We will begin by conducting an initial consultation to evaluate your personal and organizational goals and to answer any questions you may have about forming a not-for-profit entity. Once formed, our business law team can help you ensure your not-for-profit organization or charity is in compliance with Ontario and federal guidelines.
For further information about not-for-profit organizations and charities, we invite you to visit the Business Insights section of our website. If you are looking to form a not-for-profit or charitable organization, contact us today to set up an initial consultation during which we can answer any questions you may have about the entity formation process.