Non-profit corporations are different than for-profit businesses. Their purpose is not to make a profit but to benefit society or a segment of society in some way. If you are thinking about creating a non-profit or are already involved in a non-profit it is important to understand the obligations that come with incorporation as well as the laws that set out how non-profits must be run.
There are different types of non-profits - membership and charitable. Non-profits are classified based on the type of activities they will engage in. There are different rules for membership and charitable non-profits covering how they are created, run and if necessary dissolved.
Groups or organizations can decide if they want to be incorporated or not. Incorporating has some advantages but also means the organization will have to become familiar with and comply with the laws that govern non-profits.
Incorporating as a non-profit requires certain steps including choosing a name, a place for a registered office and deciding who the directors will be as well as making decisions such as the corporation type, the number of directors and whether there will be any restrictions on the activities the non-profit can engage in.
Members play a central role in non-profits. They elect the Board of Directors and also have other rights and responsibilities.
The Board of Directors is responsible for the day-to-day running of the non-profit. The law sets out a process for choosing directors as well as limits on who can be a director. The Board has certain duties and liabilities. The Board performs these duties by meeting on a regular basis.
Bylaws can be created by a non-profit but are not required. Bylaws can be used to change some of the provisions of the law governing non-profits. Bylaws and certain other records must be kept by non-profits and accessible to directors, member and in the case of charitable corporations the public.
Non-profits must have a Financial Statement prepared each year. The Financial Statement may also have to be reviewed or audited. Whether a review or audit is required depends on things like the type of non-profit, the amount of revenue and whether members have voted to not have an audit or review. Non-profits must also complete an Annual Return each year. The Financial Statement, review or audit (if one is required) and the Annual Return must be sent to the Corporate Registry.
There can be disputes in non-profits between members and the Board or between members. The law provides some protection for members and directors by making it an offence to not comply with the laws governing non-profits. It is also possible to ask the court to investigate a non-profit in some circumstances.
There are a number of reasons for dissolving a non-profit and a number of ways for this to happen. In all cases debts must be dealt with first . There are also rules about what happens to any property remaining after the non-profit is dissolved.
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