Why Incorporate A Not-for-Profit?

The best way to further your social cause is through registering it as a Not-for-Profit corporation. There are 3 main reasons for this:

Limited Liability for Board of Directors and Officers: The not-for-profit is a separate legal entity from the members of the not-for-profit. This means that in the event of a lawsuit or bankruptcy, the Directors’ and Officers’ personal assets will be protected.

Tax Benefits: Not-for-Profits are generally exempt from paying income tax, with some exceptions.

Permanence: The lifespan of the not-for-profit is not limited to your existence. Your not-for-profit can exist perpetually and be passed on from generation to generation.

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A Not-for-Profit Corporation is a legal entity that has an independent existence, separate and distinct from its members, directors and officers. The corporation owns property in its own name, acquires rights, obligations and liabilities, enters into contracts and agreements and has the capacity to sue and be sued as would a natural person.

For example, a Not-for-Profit Corporation may be insolvent while its individual members may be wealthy. As a separate legal entity, a corporation is not affected by changes in its membership and its existence continues forever unless its members or the Government take steps to dissolve it.

A Not-for-Profit corporation is governed by a board of directors. The directors are elected, and terminated (where relevant) by the members. Usually the board of directors, in turn, either elects or appoints officers such as secretary, treasurer, president. These officers are responsible for the day-to-day operations of the corporation.

Neither the directors, officers nor members own the Not-for-Profit Corporation nor do they have any right of ownership to any particular asset of the corporation and the corporation may not be operated for the financial gain of its members, directors or officers.

It bears noting that in certain circumstances, a Not-for-Profit Corporation may engage in activities that produce a “profit“. However, such activities must be incidental to and in furtherance of the principal objects.

For example, a hockey club may hold a black-tie dinner to raise funds for new uniforms and travel expenses for the team. If, after paying the expenses, the dinner event produces a profit, the monies belong to the club and are to be used for the benefit of the club.