A non-profit corporation is a legal entity separate from its members and directors formed for purposes other than generating a profit to be distributed to its members, directors or officers. While, a non-profit corporation can earn a profit, the profit must be used to further the goals of the corporation rather than to pay dividends to its membership. Non-profit corporations are formed pursuant to federal or provincial law.
A non-profit corporation can be a church or church association, school, charity, medical provider, activity clubs, volunteer services organization, professional association, research institute, museum, or in some cases a sports association.
Non-profit corporations must apply for charitable status to benefit from tax-exempt status and to issue tax deductible receipts to donors.
Non-profit corporations are distinct from business corporations which are formed to make a profit and to distribute the profit to its shareholders. Business corporations are regulated by either federal or provincial laws.
Incorporation of a professional association (that is, a corporation whose proposed name or purposes suggest that it considers itself to be an association of professionals) does not provide that corporation with the authority to practice, or to regulate the practice of, the profession. It is the corporation's responsibility to comply with provincial laws respecting professions.
Once the corporation has been created, a number of other items must be considered.
Next steps following incorporation provides information on what needs to be done after a corporation has been created and on how to operate a not-for-profit corporation under the NFP Act.You will be required to file certain documents with Corporations Canada (see Your reporting obligations under the Canada Not-for-profit Corporations Act).
At the first organizational meeting, the directors can make by-laws. This process can be simplified by referring to the Model by-laws – Not-for-profit corporations, which have been written to apply to a typical not-for-profit corporation.
Corporations Canada has also developed an online interactive tool called a By-law builder: not-for-profit corporations that allows you to generate the by-laws you want by choosing provisions that meet the specific needs of your corporation from a number of available options.
To be able to issue official donation receipts and to be exempt from taxation, the Income Tax Act requires that corporations created and operated exclusively for charitable purposes register with the Canada Revenue Agency (CRA) as charities. Consult How to draft purposes for charitable registration to know more.
The act of incorporating as a not-for-profit corporation under the NFP Act does not mean that the corporation will automatically be tax-exempt or considered as a registered charity for the purposes of the Income Tax Act.
If your corporation intends to become a registered charity, read CRA's Apply to become a registered charity before preparing your incorporating documents, particularly as it relates to the purposes of the corporation statement. It is important that this statement meet the CRA requirements to qualify for registration as a charity.
You should also know that if you need to change the purpose statement after incorporation to qualify for registration as a charity, changes to approved articles of incorporation could only be made through an amendment a separate fee-based service.
Incorporation under the NFP Act does not automatically mean that the corporation will be exempt from tax under the Income Tax Act. For more information on being considered a non-profit organization under the Income Tax Act, see the CRA's website.
Click on the Corporation Button below to begin the registration application process.
