Canada grants nonprofit status to several types of organizations, including clubs, associations and societies that are dedicated to social welfare, recreation, civic welfare and most other purposes other than making a profit. These organizations can take the form of professional organizations, social clubs, charities, athletic organizations and service organizations.
Canadian nonprofits can be structured as either federal or provincial corporations. If the entity plans to operate on a nationwide or international basis, federal incorporation is typically the best option. Provincial incorporation may be a good choice for organizations that plan to operate only within one province.
While Canadian nonprofits don’t have to pay income tax, they do have to file tax returns with the Canada Revenue Agency. The type of return filed depends on the type of organization and the value of its assets. Nonprofits that are registered charities file Form T3010, and other nonprofits file a T2 Corporate Income Tax Return, with both due within six months of the end of the entity’s fiscal year. A provincial nonprofit can file a shorter version of the form. If a nonprofit received income of more than $10,000 from dividends, interest, royalties or rentals, or if it owns assets worth more than $200,000, Form T1044 is also required. Nonprofits that own dining, sports or recreational facilities must file a Form T3, and they may need to pay income tax in the event of any capital gains.
Canadian nonprofits are also responsible for maintaining financial records, which must be made available to their directors. In addition, the entity must comply with the operational rules defined in the organization’s articles of incorporation. Nonprofit officers and employees often benefit by seeking legal and financial guidance as they handle incorporation and tax-filing issues.