Topics: Canadian Charity Law, New corporate non-profit acts, Non-Profits that are not registered charities
In the past US and other charities had mainly looked to establishing a Canadian counterpart non-profit or registered charity when they thought that either there were fundraising opportunities in Canada or they wish to conduct their own charitable activities in Canada. Over the last year we have seen many international groups outside of Canada wanting to establish either a nonprofit or registered charity in Canada to be their headquarters for international operations. This is for many diverse reasons. Some fear the rising tensions and uncertainty in the US and how this could affect the operation of their organizations. For others they would prefer to have offices or headquarters in Toronto, Montreal or Vancouver rather than in the US or a number of other countries which are increasingly unstable, xenophobic or repressive. Some organizations may just want to carry out activities in Canada or have staff who now reside in Canada and they want keep those staff.
Although there are many options for establishing a Canadian nonprofit the most common are:
1) establishing a nonprofit that's not a registered charity
2) establishing a Canadian registered charity.
The advantage of establishing a nonprofit in Canada that is not a registered charity is that it can be done in a matter of days, can sometimes cost as little as $2000-$3000 and it can be used as a base for international operations. Under the Canada Not-for-profit Corporations Act (CNCA) there are no residency requirements so the directors and members do not have to be from Canada. In most cases establishing a Federal non-profit corporation is far better than a provincial non-profit corporation even if you only plan to operate in one province. A Federal CNCA corporation can start with as few as one director, although we usually suggest 3 directors. It can have as few as 1 member. It is income tax exempt. It will need to have an address in Canada (it can have an address in Canada at the home of a supporter) but it does not need additional physical office space in Canada or even any employees in Canada. The main limitation on such a nonprofit organization is it is not allowed to carry out deliberately profitable activities. For such profitable activities, one can have an allied for-profit corporation which is taxable.
Establishing a registered charity provides added benefits like tax deductibility of Canadian donations, however, for many international groups with a little by way of Canadian supporters this may not be necessary. Or it may not be necessary in the beginning and one can apply later for such status. Obtaining registered charity status in Canada can take in some cases between 8 to 12 months and therefore if that is the preferred route it is important with the CRA backlog to start the process quickly. As the process for establishing a registered charity is far more complicated than just incorporating a nonprofit then for an operating registered charity the costs can easily be about $10,000.
It is unfortunate to see the increasing repression that non-profits and charities have to face around the world. Canada is one of the best countries to have a nonprofit and increasingly with the international uncertainty it will become a top destination for those who want to engage in nonprofit and charitable activities both in Canada and around the world.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.