Non-profit Organizations

A not-for-profit organization is a legal entity that exists independently of its members and is created with an intent to support charitable, religious, educational, sport or patriotic objectives.

Non-profit organization is a limited company, and the main difference between corporate company and that of a non-profit organization is that non-profit organisation doesn’t earn profits, nor it issues any shares or dividends to its owners and its proceeds are only used for the advancements of its objectives and to cover the operational costs associated with running such company.

In general, there are five non-profit companies:

1) Industry Association;

2) Sports Organizations;

3) Legal Aid Organizations;

4) Service Association

5) Charity Organizations

  • The company is governed by members elected by the board of directors. Generally, the board of directors appoints secretaries, directors, chairpersons, etc., who are responsible for the actual operation of the company.
  • Board members “own” the company. No director, officer or member shall own or own any particular company’s assets and the company shall not operate for the economic benefit of its members, directors or senior management.
  • Multi-channel funding sources. Canadian non-profit organization sources of funding include membership dues, fund-raising, local and federal government funding, income from sales of goods and other services.
  • In some cases, non-profit companies may engage in activities that generate “profits.” Such activities must be consistent with the purpose the company was of originally established for. For example: a men’s ice hockey club may hold a dance to order the new uniforms for the team. If the dance makes a “profit” after paying the all fees it took to organize the event, the remaining money now belongs to the club, which will be used in the club’s interest to buy new uniforms for its team.
  • Strict audit system. As NPOs are not designed to generate profits, the government closely monitors their operations, including project implementation, funding use, annual reports and more. Non-profit organizations must comply with specific financial policies and allow full audit. If these requirements aren’t compliant with the relevant provisions, the government will imply taxes in accordance with the applicable laws.
  • Chose a name of a non-profit organization and provide initial registered office address
  • A complete list of the board of directors (including its purpose, target group, etc.), a Canadian non-profit organization drafting agreement (NFP Act added links needed)
  • First board information
  • Optional; choose institutional language (English or French)

Establishing a charitable organization

Organizations (such as schools, hospitals, churches, etc.) that serve the communities, whether it is to help its members to get out of poverty or subsidizing students’ education, or organisations who have religious affiliation, can apply to create charitable organization. For that purpose, Charities can accept community donations and present receipts for donations. Non-profit organizations that don’t provide beneficial services to the public, cannot issue receipts for donations.