Starting a foundation in Ontario or anywhere in Canada is a meaningful way to give back to the community, and support causes that matter to you. However, the process of setting up a foundation involves various legal, financial, and operational steps. If you’re considering establishing a foundation, this article will walk you through the key steps and requirements for doing so in Ontario.
A foundation is a type of charitable organization that exists to provide funding for specific causes or projects. In Canada, foundations typically fall into two categories:
Foundations, like charities, must be registered with the Canada Revenue Agency (CRA) to receive tax benefits and issue official donation receipts.
The first step to setting up a foundation in Canada is deciding on the mission and purpose. Foundations must be set up for charitable purposes. The CRA recognizes four main categories of charitable purposes:
Clearly defining your foundation’s purpose is crucial as it determines whether the CRA will approve your application for charitable status. Be specific about how your foundation will make a difference and ensure your mission aligns with one or more of the recognized categories.
There are different legal structures you can choose for your foundation:
If you choose to incorporate, you’ll need to file articles of incorporation with the appropriate jurisdiction, either federally under the Canada Not-for-Profit Corporations Act (CNCA) or provincially under laws like the Ontario Not-for-Profit Corporations Act (ONCA).
Your foundation must have a governing body, such as a board of directors or trustees, who will oversee its operations. The CRA requires charities, including foundations, to be governed by at least three directors who are not related by blood, marriage, or business. You’ll need to establish bylaws or a trust deed, which will outline how the foundation will be governed, including the responsibilities of the directors or trustees, how meetings will be conducted, and how decisions will be made.
To receive tax-exempt status and the ability to issue donation receipts, you must register your foundation with the CRA as a charity. This involves submitting an application that includes detailed information about your foundation’s purposes, operations, governance structure, and financial plans.
The CRA requires:
The review process can take several months, so it's important to submit a complete and well-documented application.
For public foundations, fundraising is a key activity. Even private foundations may engage in limited fundraising to support specific projects. It's important to develop a clear plan for how your foundation will raise funds. This can include:
Ensure your fundraising plan is sustainable and aligns with your foundation's mission and values. The CRA also has specific rules governing how much a charity must spend on its charitable activities (the “disbursement quota”), so make sure your fundraising efforts comply with these regulations.
Once your foundation is registered, you’ll need to meet ongoing reporting and compliance requirements to maintain your charitable status. These include:
Non-compliance with these requirements can result in penalties, loss of charitable status, or even legal action, so it's essential to stay on top of your obligations.
Effective financial management is critical to the long-term success of your foundation. You’ll need to set up a dedicated bank account, establish internal controls to track income and expenses, and develop a budget that aligns with your mission and goals.
Many foundations also invest their funds to generate income that can be used for charitable purposes. If you choose to invest your foundation’s assets, ensure that your investment strategy is in line with your foundation’s objectives and complies with any legal requirements.
Once your foundation is up and running, it’s important to promote its activities and build a strong public profile. This can help attract donors, volunteers, and other supporters. You can promote your foundation by:
Strong communication can help build a loyal base of supporters and ensure your foundation has the resources it needs to thrive.