You are considering incorporating a Not-for-Profit in Canada. Is it a good idea? Read further for a list of 6 advantages and 6 disadvantages to incorporating a Not-for-Profit, whether federally or provincially, in Canada.
6 advantages to incorporating a (federal or provincial) Canadian Non-profit:
1. Continuity: A not-for-profit corporation has a legal status separate and distinct from its members. Members may come and go, but the corporation continues until it is dissolved or wound up.
2. Purchase power: The not-for-profit corporation can enter into contracts, and can buy property.
3. Limited Liability: Individual members of a corporation are generally shielded from liability (generally, though there are exceptions to this; more on these exceptions in a future blog post).
4. Structure: The formal corporate structure facilitates ongoing operations and decision-making.
5. Credibility: There may be increased credibility with the government, funders, and the public.
6. Governance Powers: The not-for-profit corporation has an enhanced ability, through its governing documents, to address membership status issues (e.g., removal for unpaid dues or death, and expulsion for disciplinary reasons).
6 disadvantages to incorporating a Canadian Non-profit:
1. Most jurisdictions require an annual corporate filing related to the location of the head office as well as director information.
2. Some not-for-profit entities must file an annual information return with the Canada Customs and Revenue Agency.
3. Incorporated not-for-profits must file an annual corporate income tax return.
4. Federal corporations incorporated under the NFP Act must get ministerial approval to change certain bylaws.
5. There are some constraints placed on the type of activity that the group or entity may engage in.
6. There is a need to devote time and resources to maintaining corporate structure that would otherwise go to carrying out the desired activities of the organization.