Charities are generally structured in one of two ways. Below are some of the pros and cons of each structure:
The form of a charity will generally be:
1. an unincorporated association;
2. a Not-for-Profit corporation incorporated under either federal or provincial legislation.
Considerations in determining which structure to use
Formality: Corporations are more commonly recognizable entities, where directors and potential donors are more comfortable with their structure.
Dissolution: It is easier, quicker, and less costly to dissolve an Association than it is to dissolve a NFP corporation.
Liability: Directors of a NFP corporation are generally protected from liability (they should nonetheless purchase director’s insurance), whereas Directors of an Association are exposed to being sued.
Contracts: Contracts with a NFP corporation are entered into in the name of the corporation, whereas contracts entered into with an Association, must bear the names of the members of the Association.
Real Estate – Generally, a charity which holds real estate must be incorporated. Further, an Association cannot hold real estate in its own name, but in the name of it’s Trustees. At the passing of the Trustees or when they resign, the property would have to be re-registered.
Procedures: There are established administrative procedures for Not-for-Profit corporations in connection with their creation and ongoing administration whereas Associations do not have established guidelines in relation to their creation and administration.
Governance: The law governing corporations is established and legislated, whereas the laws related to Associations are a lot less established and most lawyer are unfamiliar with the relevant laws.