Creating a Not-for-profit Charitable Corporation in Canada
Initial Creation
Some High Level Tips
- We don’t need to hire a lawyer if we’re smart about it. There’s nothing that requires a lawyers input.
- If we make a mistake, then the CRA will send it back with exactly what we have to do.
- Put a lot of nuts and bolts details into the statement of purpose and activities.
General Process
- Complete Form T2050.
- Draft Form 4001.
- Send both of the above to the CRA.
- …
Notes on Form T2050
Notes on Form 4001 (Articles of Incorporation)
Note: it’s less expensive to submit using the Online Filing Centre than it is to submit with the mail in form. Here is my own summary of the instructions for Form 4001.
Corporate name
- Must be distinctive (i.e. not be like other organizations).
- Must undergo a NUANS report.
Province / territory
- E.g. British Columbia
- No address required here – that’s for 4002.
Min / max directors
- Minimum one director, in general.
- Minimum three directors, if we want to receive more than $10,000/year in donations/grants.
Statement of purpose
- It can be anything.
- If we want to become a charity, we ought to consult the Charities Directorate of the Canadian Revenue Agency (CD of the CRA) first.
- Make sure to have lots of details – don’t leave anything to the imagination.
- This is more like a detailed business plans than it is a statement of general purpose.
- Focus on writing clear, concise prose without any flowery speech.
- Bad example: The purpose of this charity is to create a food bank.
- Good example: When, how, where, what kind of food, from where are you going to collect this? How exactly are you going to do this? How are you going to distribute that? During what time of the year? What are the families that you want to target? What’s the exact demographic?
- We need to convince the CRA that we’re doing something charitable.
Restrictions on activities
- It can be anything.
- If we want to become a charity, consult with the CD of the CRA first.
- Make sure to have lots of details – don’t leave anything to the imagination.
Groups the corporation can establish
- Set out how the members will be organized into organizational groups.
- Set out the voting rights of each group (e.g. elect directors…)
- Must have at least one class of group (i.e. everyone can vote)
- In the case of multiple groups, at least one group must have the right to vote.
Distribution of property on liquidation
- If a not-for-profit dies, we must dissolve it and dispose of its property.
- Soliciting corporations and registered charities have additional requirements here.
- [What kind of NFP do we want to be? Vanilla, Soliciting, or Registered Charity?]
Additional provisions
- This can be “none”
- Registered charities have additional requirements.
- The instructions provide examples.
- for registered charities
- for director remuneration
- for borrowing powers
Declaration
- This is just signing the paper.
Notes on Form 4002 (Initial Registered Office Address and First Board of Directors)
Corporate Name
Complete address of the registered office
Directors of the corporation
- For each director, add the following:
- First and last names.
- Residential addresses.
- None of these addresses can be PO Boxes.
Declaration
- This is just signing the paper.
Complete a NUANS Name Search Report less than 90 days ago.
Pay the filing fee of $200
After Creation
- Within 12-months, the corporation must send a copy (of what) to Corporations Canada.
- There are also some reporting obligations.
If We Want to Be a Charity
- CRA recommends submitting a draft copy of Form 4001 (above) with an application to register as a charity before filing as a Not-for-profit corporation,
- this will reduce costs in the case that the CRA requires amendment of Form 4001.
- In any case, completing of Form 4001 is the first step.
- For more info, call the Charities Directorate of the CRA at 1-800-267-2384
Two Main Advantages of Charitable Status
- Right to issue tax receipts.
- Right to receive support monies from other charities.