Should We Incorporate Our NPO?

Q: What are the benefits of incorporating a Not-for-Profit? Can't we run it as an unincorporated association with a simple constitution?

A: There are benefits and risks to not incorporating, but in our experience, it is generally recommended that a not-for-profit incorporate. The process of incorporating a not-for-profit involves [specific steps], which can be [time-consuming, but ultimately rewarding].

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Benefits of Not Incorporating a Not-for-Profit

1. Not-for-profits that are not incorporated are not governed by legislation, so they have much more flexibility.

2. Do not have to file annual corporate returns with Corporations Canada

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Benefits of Incorporating a Not-for-Profit (and Risks of Not Incorporating)

1. Liability: Unincorporated NFPs are not legally independent from their members, leaving them vulnerable to liability. In contrast, members of incorporated charities are shielded with liability protection, providing a sense of security.

2. Dispute resolution: Incorporated Not-for-profits are equipped with legislative guidance to resolve disputes, a crucial support system that is absent in the case of non-incorporated NFPs. This ensures you are guided through any potential conflicts.

3. Contracts/Property: Only incorporated not-for-profits can enter contracts, sue and hold property.

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Incorporating a not-for-profit also allows for greater transparency, accountability, and credibility. By becoming a legal entity, an NFP can access government funding opportunities, apply for charitable status, and issue tax receipts to donors. It also gives the organization a more professional image, which can attract donors, volunteers, and board members. Incorporating also ensures that the organization's assets are protected and can continue operating even if critical members leave or pass away.

However, some risks are associated with incorporating, including the cost and time involved in the process, ongoing regulatory requirements, and potential conflicts with members over governance issues. It is essential to carefully weigh the benefits and risks before incorporating your not-for-profit. Consulting with a lawyer or accountant can also provide valuable guidance.

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