Charity and NFP Legislation

If you are considering registering a charity in Canada, you probably have some lofty goals. Charities are, after all, organizations that are established to uplift and empower. They aim to reduce poverty, increase participation in society, and alleviate suffering.

However, if you were thinking that you would simply host endless high brow soirees to fill the coffers of your organization, there may be a bump in the road. That’s because there are some fairly strict guidelines about what kind of social activities charities can host, and how often they can do so.

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A Matter of Definitions

While people sometimes mix up charities and non-profits, Canadian law is actually quite clear that while non-profits can be social, sporting or community organizations, charities have to be predominantly engaged in charitable work. This is actually quite narrowly defined in the law.

Which means that if your charity spends too much time hosting social events, even if it’s for fundraising, you could very well cross the line between these two types of organizations.

In fact, if your charity hosts too many of these types of events, it could be seen as the primary purpose of the organization, which may even cause you to lose your registered charity status.

All of this is very bad news for charities, but it can happen surprisingly easily if you’re not very careful.

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Clearly for Fund Raising

Another good piece of advice for anyone who either runs or plans to create a charity is to make sure that any social events you do host are very clearly for fund raising purposes.

The authorities recognize that charities need to raise funds to continue their work, and it is accepted that one way to do this is to host various events. So, whether it is a dinner or a fashion show, a party, or a fun run, make sure that there is a clear element of fund-raising built in.

Make sure that there’s an entry fee to community events, or that the tickets for a formal event are sufficient that they will put money into your organizations accounts that can be used for your charitable work.

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All About Proportions

In order to keep your charity on the charitable side of the line, it’s recommended that not more than 10% of your time, funds, resources, and property is devoted to social activities.

It’s a good idea to set up formal methods of measuring this too. While most people want to give charities the benefit of the doubt, if you are consistently overstepping this unwritten guideline, you might get yourself into some trouble.

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Focus on the Mission

People who start and work for charities should always be driven by their mission. There’s a reason why you created this organization, and there are people out there who need your help.

If you focus most of your efforts on delivering that help and publicizing that message, you should automatically stay on the right side of the social activities line. Everything you do should be built around the idea of giving as much of the money you raise to the organizations and individuals you support.

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Consult a Professional

Fund raising for charities is actually quite a complex matter, since there are many restrictions like this. Aside from limits on the proportion of your time you can spend on social activities, even when they support your fundraising efforts, there are other business activity limitations that apply.

Most people who start a charity are driven by the mission and have the very best intentions. But even the best intentions don’t always put you in the best legal position. So, if you are not sure what you can and can’t do in your charity, be it related to social events or something else, it’s best to talk to a professional.

Create clear guidelines to be implemented in your organization about what can and cannot be done based on their advice. Base your fund-raising activities around these guidelines, so you stay on the right side of the law and of the CRA. Make sure that you are not spending too much of the money you do raise hosting events.

Charities are usually experts in their field. But they don’t always know how to maximize their impact on the world. A legal or tax specialist can help to ensure that your big dreams to change the world aren’t detailed by technicalities.

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