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by Monica Beffa
BLOG, Business, NewsJanuary 11, 20230 comments

SHOULD I OPEN A NOT-FOR-PROFIT OR A CHARITY?

Many people want to make a difference in the world by starting a charitable or not-for-profit organization. After all, what could be more gratifying than using your time, talent, and resources to help those in need? Certainly, that is a commendable goal. But before you quit your day job and put your effort towards a cause you are passionate about, there are a few things you should know.

While all charities and not-for-profit organizations operate on a not-for-profit basis, there are significant differences between them. To run the organization successfully, we would first need to understand the different rules applicable in Canada to not-for-profit and charitable organizations.

  1. WHAT IS A NOT-FOR-PROFIT ORGANIZATION?
  2. UNINCORPORATED NOT-FOR-PROFIT ORGANIZATION
  3. NOT-FOR-PROFIT CORPORATIONS
  4. WHAT IS A CHARITY?
  5. THE DIFFERENCES BETWEEN A NOT-FOR-PROFIT AND A CHARITY?
  6. HOW LONG DOES A CHARITY REGISTRATION APPLICATION TAKE?
  7. DO I NEED A LAWYER TO REGISTER A NOT-FOR-PROFIT CORPORATION OR CHARITY?

WHAT IS A NOT-FOR-PROFIT ORGANIZATION?

A not-for-profit organization is defined as an unincorporated association or corporation that operates solely for the purposes of social welfare, civic improvement, pleasure, and recreation. In general, the organization’s primary motivation is not to make a profit, but to help a specific social cause.

SO, MY NOT-FOR-PROFIT ORGANIZATION CANNOT EARN A PROFIT?

On the contrary, a not-for-profit organization is allowed and even encouraged, to receive funds to further its social purposes. The not-for-profit organization may even engage in commercial activities as long as these activities are incidental to its not-for-profit purposes. However, the funds cannot be used to provide the owners and members of the organization with financial benefits. Instead, they must be reinvested into the organization to ensure that it can continue to run.

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UNINCORPORATED NOT-FOR-PROFIT ORGANIZATION

Not-for-profit organizations can be unincorporated associations or not-for-profit corporations. What is the difference between the two?

An Unincorporated Association is a group structure where a collection of people act together to accomplish a social purpose without any intention to earn a profit. These organizations are not governed by a federal or provincial statute and are easy to establish which makes them enticing business structures for people who want their organization to exist with little government oversight.

An Unincorporated Association also allows for a flexible internal structure as the members of the organization may create their own constitution which established the rules of how the organization is run, who the members are, and how to settle any disputes that may arise. It is important to note that the organization’s constitution will not be legally binding unless the members treat it like a legal contract. To do so, you should visit a lawyer to help you create a legally binding contract.

Another important aspect of an unincorporated not-for-profit organization is that is not considered a “separate entity” under the law. In other words, it will not have the same rights as a distinct person in law. There are several repercussions of not having such rights. For example, not being considered a “separate entity” under the law means that the organization will not be allowed to enter into legally binding contracts in its own name, be sued or sue in its own name, hold property, or bring an action without first obtaining leave or permission from the courts. Instead, the members of the organization will have to do these acts themselves.

Additionally, the members in charge of the unincorporated not-for-profit will be personally liable for any acts or liabilities of the organization if any issues arise. As a result, this structure should typically be used when the activities the organization is carrying out do not put the members of the organization at risk of liability. As an additional precaution, the organization should also obtain insurance to protect itself and its members from personal liability.

Examples of un-incorporated not-for-profit organizations include Trade Unions and  Political Parties.

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NOT-FOR-PROFIT CORPORATIONS

For many people, the word corporation signifies a business that intends to make a profit. However, corporations can be created for not-for-profit purposes as well. To become a Not-for-Profit Corporation in Canada, the members must incorporate the organization under the federal Canada Not-for-profit Corporations Act or a similar provincial statute such as the Ontario Not-for-profit Corporations Act.

After the incorporation, the Not-for-Profit organization becomes a “separate legal entity” that is distinct from its members such as the shareholders, directors, and officers. Being a separate legal entity allows the corporation to enter into contracts, buy, hold, and sell property in its own name, and sue and be sued as a corporation. It also limits the liability of the shareholders, directors, and officers from any actions.

A Not-for-Profit Corporation will have formal governing rules, such as the Articles of Incorporation, describing the structure of the corporation. Another advantage to having a corporation status is the increased credibility with the public, the government, and any donors.

One disadvantage of incorporating a Not-for-Profit organization is the increased time and effort needed to manage the corporate structure (i.e. formal meetings, documentation filing, etc.). There may also be more constraints on the type of activities the organization may perform. However, these are insignificant disadvantages in comparison to the challenges unincorporated organizations may face.

Examples of not-for-profit corporations include  Soccer Foundations, Golf Club Societies, Hockey Associations, Baseball Leagues and Festival Organizations

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WHAT IS A CHARITY?

Although similar to a not-for-profit corporation, a Registered Charity has many more requirements in addition to operating for a not-for-profit purpose. To be considered a charity, the charity must meet 3 additional criteria. It must (1) be exclusively dedicated property, (2) for a charitable purpose, and (3) that is for a public benefit.

AN EXCLUSIVE DEDICATION OF PROPERTY

To qualify as a charity, the organization must exclusively be devoted to charitable purposes. If the organization is created for a charitable and a non-charitable purpose, the charity will be void. The charity must be 100% charitable, 99% is not sufficient.

CHARITABLE PURPOSE

According to the Charities Accounting Act, to be considered a charity, the organization must utilize its resources to further one of four allowable charitable purposes:

  • relief of poverty
  • advancement of education
  • advancement of religion
  • any purposes beneficial to the community

This criterion is usually the most challenging for people to meet as the courts have established many strict rules throughout the years on what activities fit the four charitable purpose heads.

For example, courts have interpreted relief of poverty to mean more than providing for the basic necessities of life. In a recent 2022 case, the court confirmed that beneficiaries of such charities do not exactly have to be on the brink of starvation as long as the charity helps alleviate even temporary financial challenges arising from emergencies (Re Jim Crerar Charitable Trust).

For the advancement of education criterion, courts have concluded that the simple provision of information or the broadcasting of news programs is not sufficient to be considered an advancement of education even though the information might be subjectively educational (News to You Canada v MNR). 

When it comes to the advancement of religion, the court has established some Guidelines to help identify what are acceptable activities. Specifically, for religious charity law purposes, the religion must encompass faith in a supreme being and have a comprehensive system of worshiping this supreme being. If the purpose and activities do not meet the guidelines, you may be at risk of the courts declining your charity’s registration application under the advancement of the religion criteria.

It is most difficult to fit the fourth criterion: the “other purposes beneficial to the community” as courts do not like to expand the definition of what is “beneficial to the community” for fears that an extremely broad definition will open the floodgates to a drastic increase of opportunistic and improper charities. To ensure your charity application will be successful, it is best to see an experienced charity lawyer who knows what purposes will be acceptable and how to formulate the application properly.

FOR A PUBLIC BENEFIT

No matter what criteria the charitable purpose falls under, it must provide a public benefit. The public benefit must be directed towards a sizable part of the community or the community as a whole. This means that the beneficiaries of the charitable purposes cannot be a list of named individuals.

EXAMPLES OF CHARITABLE ORGANIZATIONS IN CANADA

  • Food Banks
  • Soup Kitchens
  • Places of Worship
  • Animal Shelters
  • Libraries
  • Disaster Relief Organizations
  • Cemeteries
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THE DIFFERENCES BETWEEN A NOT-FOR-PROFIT AND A CHARITY?

REGISTRATION WITH THE CRA

To be recognized as a Charity in Canada, the charity must be registered with the Canada Revenue Agency (CRA). In contrast, Not-for-Profit organizations do not have to complete any further registration after incorporation.

SPENDING REQUIREMENT

Unlike charities, Not-for-Profit Corporations are not required to spend a minimum amount of money annually on charitable activities or gifts to qualified beneficiaries. The spending amount is based on the value of the charity’s property and assets that were not used to administer the activities. The assets may include stocks, bonds, lands, and money in bank accounts. If you believe that your not-for-profit corporation may not be able to raise sufficient funds to meet the spending requirement, you may want to rethink becoming a charity.

REVOKED CHARITY STATUS

It is possible for a charity to lose its charity registration status. If this occurs, the former charity would be required to pay 100% of the fair market value of all the organization’s assets which will cause much strain on the organization and its members. If the charity was also not incorporated, it may result in the members and owners of the organization being liable for the tax in their personal capacity.

OFFICIAL DONATION RECEIPTS

One significant advantage of Charities, unlike Not-for-Profit Corporations, is that the Charities are allowed to issue official donation receipts to their donors. These donors will then be able to receive tax credits for their donations. This may incentivize donors to donate to Charities instead of Not-for-Profit organizations.

TAX EXEMPTIONS

Charities are tax-exempt under Part I of the Income Tax Act. This means a Charity does not have to pay tax on any income received. The Charity is also exempt from charging any GST or HST on the services and goods they offer to the public and can sometimes claim a partial rebate on purchases.

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HOW LONG DOES A CHARITY REGISTRATION APPLICATION TAKE?

The CRA usually responds to requests for registered charitable status within six months, depending on when the request is submitted. If the CRA requires more documentation, they would notify you to make any changes or additions which will delay the process.

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DO I NEED A LAWYER TO REGISTER A NOT-FOR-PROFIT CORPORATION OR CHARITY?

Although starting such an organization can be a rewarding experience, there is a lot of planning and work involved in making sure the organization is successful. Unfortunately, many charity registration applications in Canada are unsuccessful because the requirements are difficult to meet, and the application process is quite hard to understand. To ensure a successful application, it is good practice to hire an experienced not-for-profit or charity lawyer who understands the requirements and process and can help you complete the application in a detailed and efficient manner.

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If you require any legal assistance starting up your charity or not-for-profit,  get in touch with us at Beffa Law and we will be able to help you achieve the results your desire. At Beffa Law we are serving business customers in Oakville, Burlington, Milton, Mississauga, and other areas west of the GTA. We offer assistance in business law along with other practice areas. Call us at 647-812-8462 , email us at info@beffalaw.ca or set up an appointment.

   

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12 Days of Christmas - Official Rules

Beffa Law’s 12 Days of Christmas Giveaway – Official Rules

NO PURCHASE NECESSARY TO ENTER OR WIN

Participation constitutes the entrant’s full and unconditional agreement to and acceptance of these Official Rules. Beffa Law’s 12 Days of Christmas giveaway submission period commences at 7:00 a.m. EST on December 12, 2022, and ends at 11:59 p.m. EST on December 22, 2022, with the final winner announced on December 24, 2022. The contest is sponsored by Beffa Law.

  1. Eligibility: Beffa Law’s 12 Days of Christmas giveaway is open only to legal residents of Ontario who are 18 years of age or older. Entrants must also be Canadian citizens or Permanent Residents who reside in Ontario at the time of entry. Employees, contractors, directors, and officers of Beffa Law and its respective affiliated companies, distributors, licensees, and the advertising, fulfillment, judging, and promotion agencies involved in the development and administration of this promotion and their immediate family members and those living in the same households of each are not eligible to enter the contest.
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  3. How to Enter: (all entrants acknowledge their information will not be used or sold for other marketing or promotional purposes.)
    During the promotion period, go to the Beffa Law Facebook page and Beffa Law Instagram page and follow the instructions for each of the 12 days. Entrants must like the Beffa Law Facebook page and Instagram pages before December 12, 2022, to get specific daily instructions on how to enter the contest each day.
  4. Daily Entries: MUST LIMIT ONE (1) ONLINE ENTRY PER PERSON, PER DAY. For purposes of this promotion, a day is defined as a 24-hour period beginning at 12:00 a.m. EST and ending at 11:59 p.m. EST.
  5. Prize & Odds: Daily prize will not exceed $250 and will be picked up by the winner after the promotion period ends. No substitution or transfer of prize is permitted except at the Sponsor’s sole and absolute discretion. All taxes, and all other costs associated with acceptance or use of the prizes, are the sole responsibility of the winner. The odds of winning the prize depend on the total number of entries received.
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  7. Sponsor reserves the right to remove and invalidate from this promotion posts, comments, or statements of wishes that Sponsor determines in its sole discretion are inappropriate.

General Rules: Beffa Law 12 Days of Christmas Giveaway rules and guidelines:

  1. You must be 18 or older to participate.
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  3. Sponsor reserves the right to remove and invalidate from this promotion posts, comments, or statements of wishes that Sponsor determines in its sole discretion are inappropriate.
  4. All federal, provincial and municipal laws apply. Winners will be notified through Facebook and Instagram and have 24 hours to redeem their prize. The return of any prize/prize notification as undeliverable or failure to respond to notices or return any documents in a timely manner, as determined by the administrator, may result in disqualification and an alternate winner may be chosen. By participating, participants agree to release, discharge, and hold harmless promotion parties from and against any and all liability or damages associated with this promotion or acceptance, use, or misuse of any prize received in this promotion. Promotion parties are not responsible for any typographical or other error in the printing of the offer or administration of the promotion. Acceptance of the prize constitutes permission for the Sponsor and their agencies to use the winner’s names and likenesses for purposes of advertising and publicity without further compensation unless prohibited by law. By participating in this promotion, participants agree to be bound by the Official Rules and decisions of Beffa Law, which shall be final in all matters relating to the promotion. Promotion parties are not responsible for lost, late, misdirected, stolen, illegible, inaccurate, damaged, incomplete, non-delivered, or postage-due mail; or for printing, distribution, or production errors or technical, hardware, software, or telephone malfunctions of any kind, lost or unavailable network connections, or failed, incorrect, incomplete, inaccurate, garbled or delayed electronic communications caused by the user or by any of the equipment or programming associated with or utilized in this promotion, or by any human, or other error, which may occur in this promotion. If in the administrator’s sole opinion, there is any suspected or actual evidence of tampering with any portion of the promotion, or if technical difficulties compromise the integrity of the promotion, Beffa Law reserves the right to void suspect entries and/or modify and/or suspend and/or terminate the promotion and/or conduct a random drawing to award the prizes in a manner deemed appropriate by the administrator. In the event of a dispute regarding the identity of the person submitting an entry, entries will be declared made by the name appearing on the online entry. Sponsor reserves the right to disqualify any individual who tampers with the promotion or website or acts in a disruptive manner. This promotion is offered only in Canada and is governed by the laws of the province of Ontario, Canada. By entering, entrants irrevocably consent to the sole and exclusive jurisdiction of the courts of the Province of Ontario for any action, suit, or proceeding arising out of or relating to this promotion.
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REFINANCE
  • Review mortgage instructions for refinancing.
  • Conduct and review title searches for any defects in the title.
  • Conduct and review writ searches and execution searches.
  • Secure title insurance and all correspondence with the title insurance company.
  • Review mortgage instructions.
  • Draft all mortgage documents
  • Register mortgage documents.
  • Extensive correspondence with the lenders and banks.
  • Receive mortgage funds.
  • Review certificate of insurance.
  • Meet with client to explain and sign all legal documents
  • Close the refinance transaction and securely transfer the funds
  • Register mortgage on title
  • Open the refinance file and access to client portal
  • Report to client, lender & realtor about closing
  • One in person appointment or remote signing on zoom
  • After office hours appointment.

CLOSING COSTS &  NOT INCLUDED IN FEES;

  • Title Insurance (as per Invoice)
  • Registration Costs/ per Mortgage;
  • Software Charges;
  • Flat disbursements cost, title searches, writ searches, execution searches, bank charges, courier charges etc.

CALCULATE YOUR COSTS

OCCUPANCY
  • Acting for you in matters relating to your purchase of the property
  • Review the Agreement of Purchase and Sale
  • Conduct and review title searches for any defects in the title Submit requisitions on the title and review the responses
  • Search for arrears of taxes and obtaining a certificate
  • Confirm that utilities were in satisfactory standing and arranging for meters be read
  • Search for executions
  • Examine the draft deed
  • Review the statement of adjustments
  • Reviewing the documentation provided by the builder including warranties, declarations and vendor’s and purchaser’s undertakings, and verifying enrolment with Tarion Warranty Corporation
  • Draft documents and statements in accordance with Land Transfer Tax Act
  • Correspondence with the Condominium Corporation and obtain a Status Certificate and Certificate of Insurance and review the same
  • Meet with client to explain and sign all legal documents
  • One in person appointment or remote signing on zoom
  • Close the transaction and securely transfer funds
  • Register transfer

OTHER CLOSING COSTS

  • Software charges ;
  • Disbursements includes one title search

CALCULATE YOUR COSTS

TITLE TRANSFER
  • Complete the required documents and gather the supporting documents
  • Obtain appropriate legal advice for the tax and other implications of the title transfer
  • Review the forms for completeness and accuracy
  • Perform title searches
  • Obtain title insurance
  • Update the contents and fire insurance policy
  • Update ownership records in the utility bills
  • Advise current mortgage lender of the title changes
  • Get the title change documents registered and report them to the clients
  • Send information to the city’s tax department and condo property management of changes in ownership

CLOSING COSTS NOT INCLUDED IN FEES

  • Software charges
  • Flat disbursements cost – includes one title search
  • Registration Fee

CALCULATE YOUR COSTS

SALE
  • Review mortgage instructions for refinancing.
  • Conduct and review title searches for any defects in the title.
  • Conduct and review writ searches and execution searches.
  • Secure title insurance and all correspondence with the title insurance company.
  • Review mortgage instructions.
  • Draft all mortgage documents
  • Register mortgage documents.
  • Extensive correspondence with the lenders and banks.
  • Receive mortgage funds.
  • Review certificate of insurance.
  • Meet with client to explain and sign all legal documents
  • Close the refinance transaction and securely transfer the funds
  • Register mortgage on title
  • Open the refinance file and access to client portal
  • Report to client, lender & realtor about closing
  • One in person appointment or remote signing on zoom
  • After office hours appointment.

OTHER CLOSING COSTS 

  • Title Insurance (as per Invoice)
  • Registration Costs/ per Mortgage
  • One Mortgage payout with a Tier 1 bank
  • Software & office disbursements
  • Flat disbursements cost includes one title search

CALCULATE YOUR COSTS

PURCHASE
  • Review the Agreement of Purchase and Sale.
  • Conduct and review title searches for any defects in the title.
  • Submit requisitions on the title and review the responses.
  • Conduct and review writ and execution searches.
  • Secure title insurance and all correspondence with the title insurance company.
  • Examine draft transfer deeds and draft closing documents.
  • Review the statement of adjustments.
  • Draft documents and statements in accordance with Land Transfer Tax Act.
  • Draft documents to apply for first-time home buyer rebate for the client.
  • Correspondence with the lender and banks.
  • Review the certificate of insurance.
  • Meet with client to explain and sign all legal documents
  • Close the purchase transaction and securely transfer funds
  • Register transfer
  • Report to client, lender & realtor about closing
  • One in person appointment or remote signing on zoom
  • After office hours appointment

OTHER CLOSING COSTS

  • Land Transfer Tax
  • Title Insurance (as per invoice)
  • One Mortgage with a Canadian Tier 1 bank
  • Government Registration fees
  • Teranet and search fees;
  • Software fee and other office disbursements

CALCULATE YOUR COSTS

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