Not-for-Profit Incorporation, Federally Under the NFP Act or in Ontario Under ONCA

What a not-for-profit corporation is

Members instead of shareholders

Members vote. They hold no equity, receive no dividends and take no share of any surplus.

Two statutes

The Canada Not-for-profit Corporations Act federally, and the Not-for-Profit Corporations Act, 2010, known as ONCA, in Ontario.

Not-for-profit does not mean no revenue or salaries

It can earn revenue and pay market salaries. It cannot distribute a surplus to members.

What incorporation gives you

A separate legal person that can sign contracts, hold a bank account and own property, and that shields members and directors from most of its debts.

Not-for-profit corporation compared with registered charity

Corporate step and tax step

Incorporation is a corporate law filing. Charitable registration is a Canada Revenue Agency decision.

Donation receipts

Only a registered charity may issue official donation receipts.

Charitable purposes are narrower

The relief of poverty, the advancement of education, the advancement of religion, and other purposes that benefit the community. Many not-for-profit purposes, such as a members’ social club, are not charitable.

Before registration

You may accept donations, but you must not issue official receipts or call yourself a registered charity.

Federal or Ontario

Federal, filed with Corporations Canada

Suits an organization operating or fundraising in more than one province. Corporations Canada charges $200 online. Compare federal incorporation under the Canada Business Corporations Act.

Ontario, filed with the Ontario Business Registry

Suits an organization operating only in Ontario. Ontario charges $155. Compare incorporating a business in Ontario.

Extra-provincial registration

A federal not-for-profit still registers in each province where it carries on activities.

Members, directors and officers

Votes, not equity

Each member has one vote unless the articles say otherwise.

Classes of members

The articles set the classes and which class votes, which decides who controls the organization.

Directors

An Ontario not-for-profit corporation needs at least three directors. A federal soliciting corporation needs at least three, at least two of whom are not officers or employees.

The first meeting of members

A federal corporation holds its first members’ meeting within 18 months of incorporation, then no more than 15 months after the previous one.

Soliciting corporations and public benefit corporations

The federal $10,000 test

A federal corporation that receives more than $10,000 from public sources in a financial year, such as donations from non-members or government grants, becomes a soliciting corporation.

The Ontario test

Every charitable corporation is a public benefit corporation, and so is any other corporation that receives more than $10,000 in a year in donations from non-members or government grants.

What changes

Stricter rules on directors, financial reporting and, federally, sending financial statements to Corporations Canada.

The dissolution clause

A federal soliciting corporation must provide that remaining property goes to a qualified donee on liquidation.

Articles, by-laws and the purposes clause

The purposes clause decides charitable registration

Purposes loose enough for the registry can still fail the Canada Revenue Agency charitable test, and fixing them later needs an amendment.

By-law No. 1

Membership conditions, notice of meetings, quorum, directors and officers.

Organizational resolutions

First officers, first members, the public accountant and the financial year end. See minute book preparation and corporate records.

Applying to the Canada Revenue Agency for charitable registration

The Charities Directorate

Decides whether your purposes and activities are charitable. There is no Canada Revenue Agency fee to apply.

Why applications are delayed

Most delays come from activities described too vaguely to show how they achieve the purposes.

Three designations

Charitable organization, public foundation or private foundation.

What registration changes

Official receipts, the T3010 return every year, and the disbursement quota.

Annual filings once you are incorporated

Federal annual return

Filed with Corporations Canada every year, $12.

Ontario annual return

Filed under the Corporations Information Act, no fee.

T2 and T1044

An incorporated non-profit generally files a T2. It also files a T1044 if its dividends, interest, rents and royalties exceed $10,000 or its assets exceeded $200,000 at the end of the previous year, within six months of year end.

T3010

A registered charity files the T3010 within six months of its year end instead of the T1044.

Financial statements, review engagements and audits

Federal soliciting corporations

Up to $50,000 of revenue: a review engagement. $50,000 to $250,000: an audit, unless members choose a review by special resolution. Over $250,000: an audit.

Federal non-soliciting corporations

Up to $1 million: a review engagement. Over $1 million: an audit.

Ontario public benefit corporations

Over $500,000: an audit. $100,000 to $500,000: at least a review engagement. Up to $100,000: both can be waived by extraordinary resolution.