In many ways, setting up a Canada nonprofit is similar to setting up any other business. However, you’ll find that your nonprofit has slightly different legal obligations and must handle accounting according to different requirements. At the startup phase, your nonprofit also has to file a specific set of documents to quality as a nonprofit corporation. Take a look at the basic requirements.
Required Documents When Forming a Nonprofit Organization in Canada
When you apply for a certificate of incorporation as a Canadian nonprofit, your nonprofit document packet must include:
- Your Articles of Incorporation. This is Form 4001, which must be complete and signed. Your Articles of Incorporation may be in English, French or both.
- Your Initial Registered Office Address and First Board of Directors. This is Form 4002.
- The results of a nonprofit name search that has been done within the most recent 90 days. Even if you have already received approval for your organization’s name, you must include the Nuans name search report, along with a letter from Corporations Canada that confirms the approval of the name. No name search report is required if your proposed name is composed entirely of numerals.
- Your filing fee.
- If you file your application online, your filing fee is slightly less than if you file by email, mail or fax. Turnaround time is also faster if you apply online.
Document Updates Required on a Regular Basis
Once your Canada nonprofit organization has been approved, you still have nonprofit documents to take care of on a regular basis. You must file an Annual Return yearly within 60 days of your organization’s anniversary. This is not your organization’s income tax return, but rather is a statement of updated information about your nonprofit corporation.
If you change your organization’s main address, you might file a change-of-address form with Corporations Canada. In addition, you must notify Corporations Canada if you add or remove any members of your board of directors, as well as of any change of address of the directors.
If your organization solicits donations from the public or if it receives significant government grants, you must file financial statements yearly, as well as a public accountant’s report. Corporations Canada makes all these documents available to the public.
You must also make official changes to your Articles of Incorporation if you change the organization’s name, province, number of directors, classes of members, restrictions on the organization’s activities, purpose, or distribution of property. In addition, you must file a copy of your by-laws with Corporations Canada, providing updates whenever any information in your by-laws changes.
Other Requirements for a Canadian Nonprofit
Canadian nonprofits create statements of financial position every year in lieu of the balance sheets created by most for-profit corporations. Statements of financial position include details about the organization’s net assets and liabilities, and they’re often prepared using fund accounting, which focuses on accountability regarding how funds are spent and provides the kind of information nonprofits need to report back to their donors.
Canadian nonprofits fall into one of two categories: registered charities and nonprofit organizations. Donors to registered charities are allowed to claim charitable tax credits on their tax returns, and those charities must issue donation receipts to their donors. They must also register with the Canada Revenue Agency.
Nonprofit organizations must file tax returns with the Canada Revenue Agency, but the two types file different types of forms. Registered charities never pay income tax. Other nonprofits, however, may have to pay tax on capital gains or on income received from property. Both types of nonprofits must pay sales tax. Understanding what application and reporting requirements exist for nonprofits in Canada helps these vital corporations stay organized and meet their obligations to the nation.