Do Canadian Charities and Nonprofits Need a Business Number?

If you're running or starting a charity in Canada, you may wonder if a Business Number (BN) is necessary. The short answer is yes. A BN is crucial for charities and nonprofits to interact with the Canada Revenue Agency (CRA) and other government programs.

What is a Business Number for Charities?

A Business Number (BN) is a unique nine-digit identifier assigned to a charity or nonprofit for easy interactions with the CRA and other governmental agencies. For registered charities, the BN is essential for tasks such as issuing donation receipts, filing tax returns, and applying for grants.

When Does a Charity or Nonprofit Need a Business Number?

‍Most Canadian charities and nonprofits will need a BN in the following situations:

1. Applying for Charitable Status: When registering with the CRA to obtain charitable status, a charity is automatically assigned a BN. This number will be used for all future tax-related matters.
2. Issuing Official Donation Receipts: A registered charity needs a BN to issue official donation receipts to donors, which they can use to claim tax credits.
3. CRA Program Accounts: Charities may also need additional CRA program accounts linked to their BN, such as:
   
   • GST/HST Account: If a charity makes taxable supplies over $50,000 in a fiscal year, it must register for a GST/HST account.
   • Payroll Deductions Account: If your charity or nonprofit has paid staff, you will need to set up a payroll deductions account to remit employee taxes and contributions (like CPP and EI) to the CRA.

How to Register a Charity or Nonprofit for a Business Number

To get a BN, you can apply through the CRA's Business Registration Online (BRO) portal. When applying for charitable status, the CRA will automatically assign a BN upon approval. Once your organization has a BN, it can also register for other CRA program accounts based on its activities.

When to Update or Obtain a New Business Number

• Changes in Structure: If your organization changes its legal structure (e.g., from a nonprofit to a registered charity), you may need to obtain a new BN.
• New Activities: If your charity starts new activities requiring CRA program accounts (like hiring employees or making taxable supplies), you must update your BN to include these accounts.

Key Program Accounts for Charities and Nonprofits

Charities and nonprofits often need to register for CRA program accounts, which are linked to the BN:

1. GST/HST Account: If your organization sells taxable goods or services and meets the income threshold, you'll need to collect and remit GST/HST to the CRA.
2. Payroll Deductions Account: Nonprofits and charities with employees must register for this account to remit employee payroll taxes, including income tax, CPP contributions, and EI premiums.
3. T3010 Information Returns Account: Charities must file annual returns (Form T3010) with the CRA, and this is managed under the BN.

Benefits of Having a Business Number for Your Charity or Nonprofit

‍Simplifies Government Interactions: A BN consolidates all your interactions with federal, provincial, and municipal governments under one identifier.

• Access to Grants and Funding: Many government programs and funding sources require that your organization have a BN.
• Donor Confidence: Registered charities with a BN can issue donation receipts, which donors may use for tax purposes, increasing donor confidence and trust in your organization.

In Canada, charities and nonprofits need a Business Number to legally operate and meet their tax obligations. When registering for charitable status, hiring staff, or collecting GST/HST, having a Business Number (BN) can simplify your interactions with the CRA. Ensuring that your charity or nonprofit is linked to the appropriate CRA program accounts through your BN can help streamline operations and ensure compliance with all regulatory requirements.

Operating Without a Business Number: Consequences and Considerations

Operating without a Business Number (BN) creates challenges for Canadian charities and nonprofits.

It affects their ability to claim tax benefits and limits how they raise funds and manage day-to-day activities.

Access to Tax Benefits

Without a BN, a charity cannot issue official donation receipts.

These receipts are necessary for donors to claim tax credits, which often encourages larger donations.

This limitation can reduce donor willingness to give and affect overall funding.

A charity or nonprofit without a BN cannot file required tax returns or participate in government programs that offer financial support.

The BN also enables registration for GST/HST accounts or payroll accounts.

Without it, compliance with tax laws becomes difficult, risking penalties or legal issues.

Impact on Fundraising and Operations

Lacking a BN undermines trust with potential donors and funding agencies.

Most grant programs require charities and nonprofits to have a BN for eligibility.

This means many opportunities for financial support are inaccessible.

Daily operations also become harder.

Paying employees and withholding taxes is not possible without the correct payroll account linked to a BN.

This can lead to legal non-compliance and limit the organisation’s ability to grow or hire staff.

Having a BN streamlines financial and legal processes, which is key for smooth operations.

Conclusion

Canadian charities and nonprofits generally need a Business Number (BN) to comply with tax laws and interact with the Canada Revenue Agency (CRA).

The BN simplifies government dealings, supports issuing official donation receipts, and is essential for registering payroll or GST/HST accounts when required.

For organizations unsure about when or how to obtain or update a BN, expert help can make the process smoother.

Proper registration and compliance reduce risks and ensure access to funding and government programs.

Contact B.I.G. Charity Law Group for guidance on Business Number requirements.

Reach them at dov.goldberg@charitylawgroup.ca or call 416-488-5888.

Visit CharityLawGroup.ca and schedule a free consultation!

Frequently Asked Questions

A business number (BN) is a unique identifier that charities and nonprofits use to communicate with the Canada Revenue Agency (CRA).

It is essential for tax filings, issuing donation receipts, and registering for other government accounts.

What is the purpose of a business number for charities and nonprofits in Canada?

The BN helps streamline dealings with the CRA and other government bodies.

It is used to file tax returns, issue official donation receipts, and apply for grants or government funding.

Are registered charities obligated to obtain a business number?

Yes. When a charity registers for charitable status with the CRA, it receives a business number automatically.

This number is required for all tax-related and official transactions.

How does a business number benefit a nonprofit organization in terms of taxation?

A BN allows nonprofits to register for program accounts such as GST/HST and payroll deductions.

This helps them manage tax collections, remit employee payroll taxes, and stay compliant with tax laws.

Can a Canadian charity operate without a business number?

No. A charity cannot operate without a BN.

Without a BN, a charity cannot issue official donation receipts or file necessary returns. The BN is legally required for all registered charities.

What are the implications for not-for-profits that don't have a business number in Canada?

If a not-for-profit does not have a BN, it may not meet CRA requirements. This can lead to revoked registration status.

Without a BN, a not-for-profit cannot issue tax receipts. It may also lose eligibility for funding or grants.

How does one apply for a business number for a charitable entity in Canada?

When you apply for charitable status with the CRA, they assign a BN automatically. You can also register for a BN and related program accounts through the CRA’s Business Registration Online (BRO) portal.