Charity FAQs

If you're looking to improve your community through a cause or service, starting a not-for-profit corporation is a great way to make that happen. But how do you get started? This guide will walk you through the process of incorporating a not-for-profit in Canada, explain the key steps, and help you decide whether to incorporate federally or provincially.

What is a Not-for-Profit Corporation?

A not-for-profit corporation is an organization created to serve a public or community interest. These groups reinvest any revenue they generate back into their mission instead of distributing profits to members, officers, or directors. They typically focus on activities such as promoting health, education, culture, sports, or social well-being.

For example, a local music group may host concerts to raise funds for children's music education, or a youth soccer club might charge small fees to cover expenses like equipment and field rentals, but any excess revenue is used to offer more programs or scholarships.

What Are Common Types of Not-for-Profit Organizations?

In Canada, not-for-profit organizations serve a wide range of interests, and they usually fall into one of these categories:

• Community organizations – Groups that address local issues, organize events, or advocate for community improvements.
• Sports or athletic groups – Organizations like youth soccer teams or recreational leagues that promote fitness and teamwork.
• Social clubs – These clubs offer social opportunities for their members and often host events or activities.
• Service clubs – Groups like Rotary Clubs or Lions Clubs that focus on charitable work and community service.
• Charities – Organizations aimed at poverty relief, health, religion, or education, which can also apply for charitable tax status.

Each type of organization has its own mission, but all follow the basic principle of reinvesting any money they make back into the organization to serve their community.

Should You Incorporate Federally or Provincially?

One of the first decisions you'll need to make when setting up a not-for-profit corporation is whether to incorporate federally or provincially. Your choice depends on how you plan to operate your organization.

• Federal Incorporation: This option is ideal if your organization will operate across Canada or even internationally. It gives you national protection for your organization’s name and makes it easier to expand across provincial borders. To incorporate federally, you will need to file certain forms like Articles of Incorporation and conduct a NUANS name search to ensure your organization's name is unique across the country.
• Provincial Incorporation: If your organization will operate only within one province, you may want to incorporate provincially. For instance, in Ontario, you’ll need to file Articles of Incorporation under the Ontario Not-for-Profit Corporations Act (ONCA) and submit other required documents such as a name search report and filing fee. British Columbia, Alberta, Manitoba, Quebec, Saskatchewan and the other provinces and territories have their own provincial legislation and nonprofit incorporation process as well. This process varies by province, so it’s important to check the specific requirements of the province where you plan to operate.

If you’re not sure which option to choose, it’s often helpful to consult with an experienced charity lawyer to guide you through the decision-making process.

What Are Your Responsibilities After Incorporating?

Once your not-for-profit is officially incorporated, the work doesn’t stop there. There are several ongoing responsibilities you’ll need to manage to stay compliant:

• Maintaining Records: You must keep accurate records of your organization’s financial transactions, board meetings, and membership information. These records need to be available to directors and members if requested.
• Filing Requirements: Both federal and provincial not-for-profit corporations have annual filing requirements. For federal organizations, this may include submitting financial statements and an annual return to Corporations Canada. For provincial organizations like those in Ontario, you’ll need to file similar documents with the Ministry of the Attorney General.
• Conforming to Articles of Incorporation: If any changes are made to your organization’s structure, such as a new board of directors or changes in your mission, these must be updated and filed in accordance with your original Articles of Incorporation.

Is Charitable Status Right for Your Organization?

Many not-for-profit organizations seek charitable status, which allows them to issue tax-deductible receipts for donations and qualify for certain tax benefits. However, not every not-for-profit automatically becomes a charity. You’ll need to apply for charitable status with the Canada Revenue Agency (CRA) Charities Directorate.

To qualify as a charity, your organization must focus on purposes such as poverty relief, education, or other forms of public benefit. Charities have additional obligations, such as filing an annual T3010 return with the CRA. It’s important to weigh these responsibilities when deciding whether charitable status is right for your organization.

What Are the Tax Obligations for a Not-for-Profit?

In most cases, not-for-profit organizations in Canada are exempt from paying income tax. However, depending on your organization’s activities, you may need to register for a business number and collect the Harmonized Sales Tax (HST). For instance, if your organization sells goods or services and makes more than $50,000 in a 12-month period, you are required to register for HST.

Some not-for-profits must also file a T1044 Non-Profit Organization Information Return with the CRA each year. Failing to do so can result in penalties, so it’s important to be aware of your tax filing obligations from the start.

How Can You Fund Your Not-for-Profit?

Securing funding is essential for the success of any not-for-profit. Fortunately, there are various grants, subsidies, and loans available to not-for-profits from federal, provincial, and municipal governments. The Government of Canada offers an online tool called the Business Benefits Finder to help organizations identify the financing programs for which they qualify.

In addition to grants, many not-for-profits fundraise through donations, events, or membership fees. If your organization has charitable status, issuing tax receipts for donations can be a powerful incentive for donors.

Starting a not-for-profit in Canada requires careful planning, but it’s a rewarding way to contribute to your community. Whether you choose federal or provincial incorporation, it’s important to understand the legal requirements and ongoing responsibilities involved. By taking advantage of available resources, consulting with legal professionals, and staying organized, your not-for-profit can grow and thrive, making a lasting impact on the community you serve.

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