Wednesday, May 15, 2013

Starting a Not-for-Profit Organization

Please note if you are interested in forming a non-profit society in BC, you need to contact the Ministry of Finance for information and to register:
What is a Not-For-Profit?
A not-for-profit organization registered under the provincial or federal Societies Act is similar to a for-profit or business corporation as it is considered to be a legal entity with an independent existence separate and distinct from its members.
As such, a society is entitled to acquire property, borrow money and otherwise deal with its property as an individual would deal with their property. Generally, the individual members of the incorporated society are not liable for the debts or obligations of the society. The main difference between a for-profit and a not-for-profit organization is the ability to distribute profits. In a not-for-profit, any profit must be retained within the organization and cannot be distributed to its members during the legal existence of the society.
A not-for-profit organization can choose to incorporate under either a federal or provincial society regulations. A federally incorporated organization has the constitutional right to operate anywhere in Canada. A provincial organization has the right to carry on business anywhere within the province under its registered name. If you are planning to operate an organization in a number of provinces, or across Canada, incorporation as a federal (Canada) organization may be a better option. However most organizations whose operations and activities take place within one province opt to register under provincial regulations.
Registering A Not-for-Profit
Societies are not required by law to incorporate, however, there are benefits to incorporating. When a society is incorporated, it acquires all of the powers of an individual, as well as an independent existence, separate and distinct from its members—and with an unlimited life expectancy.
A not-for-profit or charity most likely will be registered under one of the Society Act or the Companies Act, if under a provincial act, or under Part II of the Canada Corporations Act, if federally incorporated. Once the organization is registered, it needs to maintain its status.
The first step is to ensure the proposed name of your society is available. This should be done before you submit any incorporation documents.  (Fee of $30 — done through the provincial Corporate Registry.  May be done at an Access Centre.) You will not be able to incorporate a society with a name that is similar to the name of an existing society or company. This is so the public is not confused or misled by similar corporate names. Each society requires a constitution and bylaws, list of first directors and notice of address.
About Incorporation
This involves the granting of a charter, letters patent, or a memorandum of association by government legislation. Incorporation gives the organization a legal existence, which is separate from that of individual members. This means that the organization can enter into contracts with other corporate bodies or individuals and can sue or be sued in the courts. An organization with substantial financial and professional responsibilities and which employs staff should seek incorporation as it offers protection for the public, the membership, the executive and its staff.
To incorporate under the Society Act you must submit:
  • Constitution and By-laws of your organization
  • Notice of Address of Society (a post office box is not acceptable
  • List of first board of directors with occupations, home addresses
  • Fee of $100.00 made payable to the Minister of Finance (no GST)
Before proceeding with incorporation, it is a good idea to read the Societies Act. See the resource section on where to order a copy or where to view it on-line.
Filing Annually
It is a requirement that all not-for-profits in British Columbia be registered in good standing as societies with the Ministry of Finance in order to be eligible for financial assistance from the province.
Organizations must file an annual return with either the provincial or the federal government, depending on their incorporation statute. If they fail to do this each year, the organization can be struck from the register. If that happens, the organization doesn’t legally exist. Notification about annual returns is sent to the last known address. Ensure that someone in the organization knows that location.
It’s a good idea to have the treasurer keep a copy of the annual report, together with the most recent financial statement and board list with home addresses.
About Charitable Status
If your organization becomes registered as a “charitable organization” with Canadian Customs and Revenue Agency (CCRA) it will be permitted to issue charitable tax receipts and will not pay tax on income. Not all not-for-profit groups are able to gain charitable status since this privilege is granted only to organizations that pursue the defined charitable causes of “relief of poverty, advancing education, advancing religion, and activities beneficial to the community as a whole.”
Any organization which fails to benefit the community as a whole or has as their main purpose the promotion of a particular viewpoint could be denied charitable status.
Registered charities are automatically eligible for a refund of 50% of most GST paid. If your organization is currently eligible and if this refund would be significant then you might consider registration.
If your organization is interested in using gambling or gaming for fundraising, you may find it advantageous to obtain registered charitable status in order to access bingo and other revenue sources. Non-charitable organizations will find it difficult to become registered charities solely to obtain resources from gambling.
Advantage of Registering a Not-for-Profit
There are two advantages to registering a not-for-profit organization. First, the organization will be able to issue receipts. These receipts reduce the tax payable for the individual donor, or, in the case of a corporation, reduce the taxable income. The second benefit is that, upon registration, the organization is exempt from paying income tax.
In the case of a not-for-profit organization, ‘registration’ refers specifically to registration with Revenue Canada for income tax exemption. If your organization has no need for tax-exempt status-if it will not be accepting gifts and issuing official receipts for income tax purposes-then your organization does not need to register.
Registering for Charitable Status
Obtaining registered charitable status can be a costly process that can take anywhere from six months to several years. Some legal costs may be incurred during the process and there is no guarantee that Revenue Canada’s approval will be obtained.
Once an organization obtains charitable status, this can be lost if it fails to continue meeting the requirements for charitable status. For example, if an organization begins earning profits and spending less than 80% of this on advancing the objectives of the organization or if the organization becomes too political and begins primarily advancing a particular viewpoint, its charitable status can be revoked.
CCRA requires that organizations file a detailed questionnaire on a yearly basis in order to determine if the organization continues to qualify as a charitable organization. The CCRA provides information about registration of a charity at its website which is listed in the Resource Section.
Constitutions and Bylaws
Aside from having to follow the legal and financial regulations of the province, a not-for-profit organization needs its own internal constitution and bylaws. These rules, which must be decided on and approved by the board of directors, will govern all the operations of the organization.
The scope of a constitution
A constitution defines the structure of an organization. It establishes the number of directors, their length of term and the powers and duties of the board, among other things. A constitution details all of the procedures for the organization, from how minutes are entered and distributed, to how votes are conducted. In addition, a constitution outlines the procedure for making changes and amendments to the constitution itself.
A constitution can be fairly simple, or very complex. In general, the larger an organization is, and the larger the area it services, the more complicated its constitution will need to be.
If an organization is incorporated, it will not only have a board of directors for the organization, but officers for the corporation as well. The Articles of Incorporation will detail the roles of the directors, but the constitution must be drafted in full awareness of the relationship that exists between board members and officers.
Writing a Constitution and Bylaws
Even a simple constitution is an important legal document. With that in mind, it’s a good idea to draft a constitution with the assistance of an attorney experienced in not-for-profit law. Furthermore, since it is not always easy to amend a constitution once it’s approved, make sure that it not only serves the organization in the early stages, but that it will also be adequate when an organization expands.
What to include in the Constitution
  • Name and objectives of the organization
  • Area or location: where the organization operates
What to include in your Bylaws
  • Distribution of powers within the organization
  • Criteria for regular membership including voting eligibility
  • Criteria dictating voting powers
  • Titles, duties and length of terms for officers
  • Terms of reference for the board of directors and/or the executive committee including voting powers
  • Delegation of authority
  • A process to amend the constitution
  • A statement that the organization must not be operated for a gain by the members
  • Regulations for the audit of accounts
  • Regulations for the custody and use of the organization’s seal
  • Regulations for the preparation and safe-keeping of the registry of members, minutes of general, board and committee meetings, financial reports and other documents
  • A statement of the time and place at which members can inspect the financial records of the organization
  • The procedures for the execution and certification of contracts, deeds, bills of exchange and other documents on behalf of the organization
  • A statement indicating whether proxies (voting) are permitted and by which means. For example, when voting, are faxed or email votes acceptable?
  • Method for admission of regular members (individual or groups)
  • Criteria for any other classes or subdivisions of memberships such as associate or honorary
  • Conditions and procedures for the termination of membership
  • Procedures for election and removal of officers, board members, and chairs of committees
  • Procedures for election and terms of reference for standing committees
  • Procedures for setting membership dues
  • Procedures for calling and conducting annual, regular, special and telephone, on-line meetings
  • Number constituting a quorum for general meetings, board meetings, and committee meetings
  • The authority for rules of order
  • Methods of voting, including the proportion of votes required for important decisions
  • Conditions for employment and termination of staff and their status within the organization
  • Procedures for amending the bylaws
Each member of an organization should have access to an up-to-date copy of the constitution and bylaws.(See article Community Arts Council Sample Constitution for example).
About Membership
Members are an important part of the organization. Essentially they are its core customers and an organization exists in order to meet their needs. Members are responsible for selecting the board.
Membership fees and benefits should be clearly communicated and delivered in the constitution.
How members participate in an organization
Members can participate and support an organization by:
  • Attending meetings regularly and being aware of current business
  • Becoming familiar with meeting procedures and financial statements
  • Using the services providing and giving feedback
  • Understanding each motion presented at meetings before voting
  • Getting to know board members before voting
  • Understanding the mission of an organization
  • Being aware of the funding an organization receives
Tips for Recruiting Members
  1. 1. When you are recruiting a member you are essentially selling your organization’s membership to that person. When recruiting, listen to your recruit’s needs  and highlight the membership benefits you think they will find most useful.
  2. 2. Follow up! Don’t expect a person to join on their own. Polietly follow up with your recruits to see if they have any questions.
  3. 3. Personalize the process. It may help to let you recruit(s) know what you find most valuable about your own membership. Let them know the personal benefits that can be gained from membership.
  4. 4. Be prepared to answer questions. It’s a good idea to have some resources on hand when speaking to recruits. A list of the membership benefits, brochures and sample newsletters are a good idea.
  5. 5. Invite a recuit to a meeting. Show them how membership can offer them entrance to a strong professional network that will support both the community and their own development.
  6. 6. If your recruit’s hesitation is financial, try to point out the many ways being a member can save them money or suggest that dues be spread out over smaller payments.
Starting a Not-for-Profit Organization in BC
Ministry of Finance (BC)
PO Box 9417 Station Provincial Government, Victoria, BC V8W 9V1
T: 250 387-3751 |
A Guide to Incorporating with Forms and Fees(PDFs for downloading) or
Charity Division of Canada Revenue Agency (Operating a Registered Charity)
P: 1 800 267-2384 |
BC Online Government Services
Society Act
Society Act on-line version is able at this link:
You can obtain the Queen’s Printer official printed version from:
Crown Publications Inc.
521 Fort Street Victoria, BC V8W 1E7
T: 250 386-4636
Online Resources
These sites have many links to other resources and cover most topics related to not-for-profit management.
Charity Village: Canada’s super site for the not-for-profit sector
Non-Profit Genie (US)
Free service to help nonprofit staff and board members manage more successfully
Bibilography of Charity Law in Canada
Non-Profit FAQ at
Information and advice about not-for-profits from discussions on email lists, in UseNet, and other sources.
About Non-Profits
Guide to hundreds of sites on not-for-profit management
Non-Profits Can
Canada’s most comprehensive source for information
I Know
Interactive knowledge for non-profits world wide
Suggested Reading
The Complete Guide to Non-Profit Management
Smith Bucklin & Associates
John Wiley & Sons Canada, Ltd.
High Performance Non-Profit Organization
Christine Letts, William P. Ryan, Allen R. Grossman
John Wiley & Sons Canada, Ltd.
Managing the Non-Profit Organization
Peter F. Drucker

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