Setting Up a Nonprofit Business

by Thom Tracy

2 min read

There are advantages to setting up your business as a nonprofit. If the organization meets the Canada Revenue Agency’s guidelines, you might also take advantage of registering it as a charity. Some organizations meet the requirements for a charity but still meet the qualifications for a nonprofit. In either case, incorporating protects the corporation’s members from personal responsibility for any debts it incurs.

Decide the Best Jurisdiction

Organizations can register in their local province or as a federal organization. While local registration is generally less expensive, federal registration lets you operate the nonprofit corporation across all of Canada. In addition to registering as a federal nonprofit, businesses can also register in any province where they have a location.

Recruit Members

An individual cannot register a nonprofit alone. Most provinces require at least three members for a nonprofit to register. Federal registration requires the same number of individuals. If registering in Nova Scotia or British Columbia, the organization must have a group of five or more.

Choose a Name

Canadian law requires the selection of a unique name for every corporation. Prior to approval of the name, the law requires a name search for determining if the name is truly unique. Nonprofits follow the same rules for name selection as any other business.

Write the Articles of Incorporation

Every corporation, whether it is a business or nonprofit, must submit its articles of incorporation with its application. If applying as a charity, the articles must include the specific wording the CRA requires for approval. The corporation must hold annual meetings and adopt by-laws.

Determine if the Organization Is a Charity

The CRA limits organizations that qualify as charities to those that provide education, religious training, and the relief of poverty, but court rulings have expanded the regulations to include certain other groups that provide specific services to the community. If the organization qualifies to register as a charity, it can issue receipts for donations. Charities are exempt from income taxes and can accept donations from other charities. Donors often see registered charities as more credible due to the regulations they must follow. The officers of the organization or a designated representative can submit the application for evaluation and determination if it qualifies. Some nonprofits find the laws that regulate charities do not fit their mission.

Wait for Approval

As of 2017, the average processing time for a nonprofit corporation is 30 days. Provincial applications can take from 15 to 60 days depending on the location. While there are additional fees to expedite the provincial application, in locations where it is available, the waiting period is cut in half.

Fulfill Your Legal Obligations

Once the nonprofit application is processed, the new corporation has several responsibilities. It must establish an office and file a Notice of Office. If there is a change of directors, a notice must also be filed. Nonprofits must file annual reports and financial statements annually. While the process takes time and effort, setting up the corporation correctly allows members to focus on its purpose. If the corporation is a charity, it can start soliciting donors, while other types of nonprofits can begin offering services and channeling excess funds back into building the new organization.

References & Resources

Related Articles

What’s Changed in the New QuickBooks

The new QuickBooks Online bookkeeping software has gone through quite a few changes. As…

Read more

The Ministry of Small Business, Red Tape Reduction, and Other Programs in BC

As of 2017, British Columbia has the fastest-growing gross domestic product of…

Read more

The Nova Scotia Labour-Sponsored Venture-Capital Tax Credit

Nova Scotia and other eastern provinces have a history of trouble attracting…

Read more