Should I Incorporate my Not-for-Profit Federally or Provincially?

Short answer: Almost always, federally.

Incorporating your Not-for-Profit federally is superior to incorporating provincially for almost all NFP incorporations, for the following reasons, amongst others:

1. Incorporation Turnaround: To Incorporate a Federal Not-for-Profit is sometimes as quick as a few hours, and almost always within 24 hours.

Provincial Not-for-Profits take at least 2 weeks to incorporate if you pay the “expedited fee” of $255.00. If you don’t want to pay for them to expedite your file, the turnaround time is at least 8 weeks, usually longer.

2. Updating to ONCA: Provincial corporations, formed in Ontario, will have to amend their incorporation documents and by-laws in the next couple of years, when the new Not-for-Profit legislation (“ONCA”) comes into effect in Ontario. This will cost these Not-for-Profits potentially thousands of dollars in legal fees, depending on how extensive the amendments are.

The new federal Not-for-Profit legislation, in contrast, if already in effect, is working very well, and is not expected to change any time soon.

3. Corporate Changes: A corporation formed federally, can make corporate changes immediately, almost always for free, and the information is updated in the government’s database instantaneously. And if you want a copy of the corporate documents, it is very easy, quick and cheap to obtain them.

Provincial corporations must pay to make changes if the changes are processed electronically, and if you want to obtain copies of copies of corporate documents, it takes several days, as it is still stored on microfiche… And to amend the Letters Patent of an Ontario corporation, the process can sometimes take 3-5 months for the Ministry to process the amendment.

4. PGT: Many corporate changes for Not-for-Profits formed provincially require approval from the PGT, which can significantly slow down the process and create more red tape for provincial Not-for-Profits. Incorporating your Not-for-Profit federally circumvents that extra layer and cost of the going through a PGT review.
5. Audit Requirement: Provincial corporations with annual revenue of over $100,000 must conduct a financial audit, which can easily run $5k-10K. Federal Not-for-Profits on the other hand have a much higher threshold, $250,000, before an audit is required (and even that benchmark can be waived under certain circumstances).

(* Note, this blog post is no longer accurate do to the passing of the ONCA and significant modernization of the provincial filing options. Nonetheless, most charity lawyers in Ontario continue to recommend federal incorporation for their not-for-profit clients seeking to register as a charity, for reasons hopefully to be discussed in another blog post.)