Module 3 - Non-Profit Organizations

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Toronto Metropolitan University *

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603

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Law

Date

Feb 20, 2024

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docx

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This week's readings are not in the Textbook. You will access the readings by going to the website links set out below:  Council on Foundations. Nonprofit Law in Canada  Government of Canada. What is the Difference between a Non-Profit Organization and a Registered Charity  Government of Canada. What are the different types of registered charities?  Government of Ontario. New Ontario Not-for-Profit Corporations Act (effective Oct. 19, 2021) https://www.ontario.ca/page/guide-not- profit-corporations-act-2010#section-0  Government of Canada. How to Create a Federal Non-Profit Corporation  Government of Canada. What are the different types of registered charities?  Government of Canada. How do you Draft Purposes for Charitable Registration  Government of Canada. Federal Government’s By-law Builder Tool for Not- for-Profit Corporations  Government of Ontario, Guide to the Non-For-Profit Corporations Act, 2010 Introduction The charity and non-profit sectors are a significant part of the Canadian economy and have a big impact upon Canadians through job creation, volunteering opportunities, consumption and production of goods and services, and social benefits. In this module we will discuss non-profit organizations and charities. Although many consider a charity to be merely a type of non-profit organization, legally that is not correct. Charities are governed by strict rules that if adhered to gives them the privilege of being able to issue official donation tax receipts to donors. Non-profit organizations do not have that privilege. As a result, from a tax standpoint, it is more desirable to donate to a charity than it is to a non-profit organization. Among other things, we will discuss the differences between non-profit organizations and charities and the different legal structures that may be used for these entities. Topics and Learning Objectives Topics This module will cover the following topics:  Non-Profit Organizations and Charities

o Non-Profit Organizations o Charities o Non-Profit Organization vs Charity  Charities o Types o Charitable Purposes  Federal Non-Profit Corporation Learning Objectives By successfully completing this module, students will be able to:  Non-Profit Organizations and Charities o Demonstrate an understanding of the difference between a charity and a non-profit organization.  Charities o Describe the different available legal structures for a charity and for a non- profit organization. o Demonstrate an understanding of the 4 different charitable purposes. o Explain the 3 types of registered charities. o Demonstrate a basic understanding of how a charity becomes registered.  Federal Non-Profit Corporation o Apply the steps in creating a federal non-profit corporation. Non-Profit Organizations Non-profit organizations (“NPO”) and charities operate on a not-for-profit basis, but are very different. We will start by looking at the characteristics of NPOs. Some key points about NPOs are set out below:  They are associations, clubs, or societies that are not charities ;  They are organized and operated exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit;  Activities may generate profits provided it is clearly not the NPO’s purpose;  All their resources must be used for their activities;  Income cannot be distributed to their members, officers, directors or trustees;  They are tax-exempt (with limited exceptions); and  There are no limits on political activities.

If an organization is operating as a charity (whether it is registered as a charity or not) it cannot be an NPO. A few examples of NPO are:  Amateur sports organization (e.g., basketball association; hockey league; soccer league)  Social, recreational, or hobby groups (e.g., chess club; golf club; community social club)  Festival organizations (e.g., jazz festival; holiday parade)  Professional association (e.g., Canadian Medical Association; Canadian Real Estate Association)  Political Party Generally, an NPO can be legally structured in the following ways: Trust A fiduciary relationship where a donor or settlor allows a trustee to hold property for the benefit of other persons or for some stated purpose. Unincorporated association Group of 2 or more persons with a mutual objective, but not for profit. Corporation without share capital A corporation without share capital is a creature of legislation. It may be created under the federal Canada Non-Profit Corporations Act or under a similar provincial statute. This type of corporation does not have shareholders but has members. Members cannot benefit financially from the corporation. Co-operative without share capital A co-operative is a creature of statute. It may be created under the federal Canada Cooperatives Act or under a similar provincial statute. The co-operative will have members. No surplus or dividends can be paid to members. Charities Charities, like NPOs, operate on a non-profit basis, but as noted earlier are very different. A few important points about a charity are:  it is not an NPO;

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