Non-Profit Incorporation: How Do Charities and Non-Profits Differ?

Completing the non-profit incorporation process can help you protect against personal liability and can also ensure that your organization has an unlimited lifespan. However, before you start the non-profit incorporation process, you may wonder how a non-profit corporation is different from a charity and how this could affect your incorporation choices.

Non-Profits

Non-profit corporations are legal entities that can be incorporated to carry out different charitable, philanthropic, religious, professional, sports-related, professional, or social goals. Although they are not incorporated for the purpose of earning a profit, they can still participate in activities that allow them to acquire revenue and make a profit. Any profits earned by a non-profit corporation must be used by the organization to help it to meet its stated goals or purposes and cannot be generally distributed to the corporation’s members.

When you complete the non-profit incorporation process, the non-profit corporation is considered to be a separate legal entity. The organization can acquire rights and own property in its own name and it can assume liabilities and other legal obligations. It also has the ability to enter into various contracts and agreements with others and sue or be sued as a legal person.

Charities

A charity is a sub-type of non-profit organization that is created to conduct activities that are designed to benefit society. Non-profit corporations with purposes that are considered charitable at law are charities. For example, a charity can pursue educational initiatives, work to relieve poverty, advance religion, or work towards any other goal that is considered legally charitable, as defined by the courts.

A charity in Canada can apply for registration with the Canada Revenue Agency to become a Registered Charity, which gives the charity the ability to issue tax receipts for donations. Registered charities must comply with additional rules, including rules relating to the relationships of directors, strict spending and compensation rules, and rules relating to control and use of the charity’s assets in furtherance of its charitable purposes.

Articles on this blog are general in nature and are provided for informational purposes only. Use of this blog does not provide or replace individualized legal advice and does not create a solicitor-client relationship with our firm. Users who require legal advice on a particular matter should consult directly with Mr. Eric Cohen, Barrister & Solicitor, an Ontario lawyer or a competent lawyer in their Province or State.


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