Non-Profits Vs. Charities: The difference

The terms “non-profit,” (or “not-for-profit”) and “charity” are frequently used interchangeably. However, from a legal viewpoint, they are very different entities.

The term “non-profit” typically refers to

·         social clubs;

·         professional groups;

·         golf and other recreational clubs;

·         sporting clubs;

·         fraternal organizations;

·         trade groups;

and the like.

The term "charity" or “charitable organization” refers to entities whose objects promote:

·         Religion;

·         Education;

·         Providing care to disadvantaged members of society.

Many registered charities are incorporated as non-profits, but they need not be. Canadian charities can also be trusts, partnerships, or unincorporated associations.

Overlap

To be registered as a charity in Canada, the charity must be operated on a not-for-profit basis. However, not all non-profit organizations are charitable.

Benefits of Charity registration

While both not-for-profits and charities may qualify for exemption from income tax, being a registered charity provides the extra incentive that it can offer donors with charitable receipts.

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