This discussion is for Alberta non-profits seeking to incorporate and that are planning to fundraise or seek grants.
Incorporation Benefits
Like for-profit corporations, an incorporated non-profit entity has several benefits, including limited lability, formal structure, and the ability to hold property and enter into contracts. Typically non-profits are set up similarly to a for-profit, with constating documents that create them and set out the terms of their existence. Non-profits also typically have directors and officers, but members replace the shareholder role.
In contrast to a for-profit corporation, non-profits do not pay income taxes, may have special considerations under GST regulations, and may have access to certain types of funding that are reserved for non-profits. In many instances, funding agencies will only grant to non-profits that are incorporated. Despite these benefits, there are fees and filings to set up an incorporated entity, and there are regulations to follow and ongoing filings to be made.
The most common types of non-profit entities in Alberta are:
Societies incorporated under the Societies Act (Alberta) – incorporating information
Non-profit companies incorporated under the Companies Act (Alberta) – these companies can be private (limited to 50 members and cannot sell memberships) or public and they can have share capital or be limited by guarantee – incorporating information
Not-for-profit companies incorporated under the Canada Not-for-Profit Corporations Act (CNCA) – Alberta companies that incorporate under the CNCA will also need to extra-provincially register in Alberta - incorporating information and extra-provincial registration information
Cooperatives incorporated under the Cooperatives Act (Alberta) – cooperatives can be either for-profit or non-profit – incorporating information
Initial Considerations
Will you be carrying on business activities? If yes, do not incorporate under the Societies Act.
Will you be doing business across Canada, or will you otherwise want a national presence? If yes, incorporate under the CNCA. You will need to extra-provincially register in Alberta and all other provinces/territories that you are doing business in.
Are you seeking to operate your business as a group of individuals working together? If yes, consider incorporating under the Cooperatives Act.
Are you seeking a familiar structure (to a for-profit) with modern legislation and easy & quick filing? If yes, choose the CNCA.
Getting into the Details
The following compares some of the commonly asked questions about each type of entity.
*A CNCA company is considered to be “soliciting” if it solicits donations. This doesn’t apply though until after the first financial year where you raise more than $10,000.
Fundraising Information
Your non-profit may be eligible for registration as a charity under the Income Tax Act, the main benefit of which is to issue donors charitable receipts. This is a very involved process and legal advice and support is recommended.
If you are fundraising more than $25K per year (whether you are a charity under the Income Tax Act or not), you likely need to register under the Charitable Fund-Raising Act (Alberta). Companies typically take care of this registration themselves.