There are two main types of corporations:
- A business corporation is formed to make a profit and distribute that profit to its shareholders.
- A non-profit corporation is formed to carry on activities for purposes other than the financial gain of its members. It can earn a profit, but any profit must be used to further the goals of the group rather than be paid out to the members.
Some common examples of non-profit corporations include: sports groups, activity clubs, day cares and service groups. Not all non-profit organizations are incorporated.
A non-profit group may be incorporated by one or more people in four basic steps. Read on below if you are still unsure if incorporation is the right thing for your non-profit organization.
Why a Non-Profit Organization May Wish to Incorporate
Incorporating gives an organization legal status and creates a distinct legal being. It is not essential that a non-profit organization incorporate. The decision to incorporate depends on many things, including the organization's activities and the nature, or type, of organization.
Some of the reasons to incorporate include:
- To have a formal structure under which to operate.
- A corporation can take part in legal proceedings in its own name.
- To hold title to land.
- A corporation can own and sell property in its own name.
- To qualify for grants or funding.
- Funding opportunities may be greater because the organization may have increased stability.
- To apply for a bingo or lottery license; and
- To limit the personal liability of members. Generally, a shareholder of a corporation is only liable to the extent of his/her investment in the corporation.
- The membership may change, but the corporation continues to exist as the same legal being.
A non-profit corporation is formed to provide a service for its members or the public. Any profits received from its activities must be used to further its purpose.
An unincorporated association is an organization created by an agreement or understanding among a group of individuals. It has no legal status. Its members are personally responsible for any debts of the organization. If it gets into legal trouble, all of its members can be sued individually. Also, title to any property must be in the names of all individual members, which can make buying and selling property difficult.
There are two kinds of non-profit corporations:
| Membership Corporations |
Charitable Corporations |
| Financed by members through membership fees, loans, fundraising |
Financed by government grants, donations, public property |
| Primarily for the benefit of members |
Primarily for the benefit of the public |
| Requires at least 1 director |
Requires at least 3 directors |
| May pay a salary to employees |
May pay a salary to employees |
| Members may receive remaining property on dissolution |
Members may not receive remaining property on dissolution |
| May invest its funds as directors think fit, subject to the limitations contained in any gifts and the articles or bylaws |
May invest its funds in shares, debentures, bonds, mortgages, or other financial instruments (including mutual funds) in which trustees are by law permitted to invest. Contact your legal advisor or refer to The Trustee Amendment Act, 1998 |
Need more information?
General Administrative Requirements (Non-Profit Corporations) - These provisions are for general guidance only and do not neccessarily cover all requirements.
General Administrative Requirements - Extra-provincial Corporation