Apply for Charity Registration

It is commonly believed that establishing a registered charity is the primary (or sole) choice available for those who aim to create a social benefit organization. However, there exists a variety of organizational models that operate to achieve social good. People frequently consider founding a charity due to their enthusiasm for a cause and a brilliant plan to achieve their goals. They may also possess substantial funds to donate to a particular cause, but prefer to ensure that the funds are employed for a specific charitable endeavour.

How does a nonprofit organization differ from a charity?

While these phrases are often used interchangeably in everyday speech, the Canada Revenue Agency (CRA) provides a useful chart that highlights the distinctions between their legal definitions under the Income Tax Act.

In Canada, the term "nonprofit" is typically used to describe organizations that fall into one of three categories:

Registered Charity

Charities differ from not-for-profit corporations in that they operate programs that fulfill the charitable activities specified by the Charities Directorate of the Canada Revenue Agency. These organizations are subject to registration and regulation by the CRA, and they possess the authority to provide tax receipts to contributors.

Foundation

Canadian foundations are a specific type of registered charity whose primary purpose is to allocate funds to qualified donees. These entities may provide grants (donations) to other charities, function as a funding source for another charitable organization (such as hospital foundations), or engage in their own charitable initiatives.

Nonprofit corporation

Incorporated as a distinct legal entity apart from its directors and members, some organizations may decide against registering as a charity with the CRA. While they are permitted to generate profits, any earnings are utilized to advance their corporate objectives and are not distributed among shareholders, members, or directors.

Which option is suitable for you?

The choice of which option to pursue is contingent upon the nature of your planned activities. While charities offer certain advantages, such as the ability to provide tax receipts to donors, favorable income tax treatment, and a high level of public confidence, not-for-profit corporations and social enterprises encounter fewer regulatory restrictions when it comes to generating revenue through events, fundraising, and product sales. Here are some alternatives to establishing a charity:

Collaborating with an established charitable organization

Utilize online platforms like CanadaHelps, CharityData, or the CRA's registry of approved charities to investigate established charitable organizations that offer comparable services or advocate for the same cause.

Functioning as a nonprofit organization

In situations where your goals involve both charitable and non-charitable activities, establishing a nonprofit corporation may be more suitable. Nonprofits have more flexibility in their operations, despite not being able to provide tax receipts. Compared to charities, nonprofits face less stringent rules in the following areas:

• Political involvement (charities have limitations)
• Organizing fundraising events and other types of events (charities are required to follow receipting protocols)
• Charging user fees (charities are required to follow receipting protocols, which nonprofits are not bound by).

Operating as a social enterprise or commercial entity

If your program or service is beneficial to both the community and the participants, and the fees or sales from related products generate revenue that surpasses the cost of running the program(s), establishing a social enterprise could be a viable option. In addition, commercial enterprises can recover all of the GST/HST/QST they pay through input tax credits, while charities receive only approximately half of the tax rebate.

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