A non-profit organization (NPO) is a form of organization whose primary purpose is to pursue and promote, among other things, a social, cultural, educational or religious mission, rather than to make a profit. NPOs are generally created to serve the public good and meet social needs, and are often tax-exempt due to their non-profit status.
Revenues generated by an NPO are generally put back into the NPO and used to achieve its mission objectives. Profits cannot be distributed to members or owners.
NPOs can take different legal forms, such as associations, foundations or co-operatives, and are governed by specific laws and regulations in each country or jurisdiction. In Canada, as with a corporation, you can incorporate your NPO under federal or provincial law.
There are several steps to creating an NPO. Here are 5 main steps to creating your NPO.
Establish who the founding members are and who makes up the board of directors
The organization must have a minimum of three founding applicants to be incorporated under Quebec law and must maintain a board of directors composed of at least three directors at all times. The first directors are the three applicants. In Canada, a single person can apply to create an NPO and be its sole director. The founders can decide on the name of the NPO and must agree on the objectives and mission of the organization.
Drafting the by-laws
By-laws are the legal document that formally establishes the NPO. They usually contain essential information such as the organization’s name, mission, governance structure, members’ rights and responsibilities, and procedures for general meetings and elections. Bylaws must be signed by the founding members and elected directors. It is recommended that you consult a lawyer to ensure that your bylaws comply with the laws applicable to your organization and the standards in force.
Holding a constituent general meeting
The founding members must hold a founding general meeting at which the by-laws are adopted, directors are elected and decisions are made to establish the NPO. To prepare for this founding general meeting, it is wise to set up a detailed agenda including the ratification of the bylaws, and to hold the meeting following the legal procedures in accordance with the applicable law. Among other things, the founding members will have to adopt the by-laws and elect the directors.
Filing the documents with the government
In Quebec, the creation of the NPO requires a statutory declaration signed by a person authorized to receive oaths, and the mailing of the application documents. A certificate of incorporation will then be issued, formalizing the creation of the NPC. At the federal level, the application for incorporation can be done entirely online. Once the NPO is incorporated and the by-laws are adopted and signed, they must be filed with the Director for federal NPOs. In both cases, the organization must then be registered in the province indicated in its articles.
Obtaining a charitable registration number
If the NPO plans to apply for charitable donations and issue donation receipts for tax purposes, it will need to obtain a charitable registration number from the Canada Revenue Agency (CRA)
Conclusion
Don’t forget! It is recommended that you consult a lawyer to ensure that your by-laws comply with the applicable laws and current standards, that you file the required documents with Corporations Canada or the Registraire des entreprises du Québec to register the NPO, and that you fully understand the responsibilities and legal obligations related to the creation and management of an NPO in Quebec as well as at the federal level.
Lexstart supports you in the creation of your NPO. Our qualified lawyers and our account managers are at your disposal to advise you and accompany you in the different stages of the creation of your organization.
