A non-profit’s purpose it to not make a profit, but to benefit society or a segment of society in some way. They’re clubs, associations, or societies that are not charities, and are organized and operated exclusively for social welfare, civic improvement, pleasure, recreation, etc. Almost any other purpose, except profit. If you’re thinking about becoming a non-profit, or maybe you’re already involved in one, there are certain obligations that come with incorporating, as well as laws, that must be followed.
Types of Non-Profits
There are two kinds of non-profit organizations: charitable or membership.
Charitable Non-Profit
May or may not have members.
Carries on its activities primarily for the benefit of the public.
Is usually funded by donations, grants or other public money.
Requires at least one director (board member).
Membership Non-Profit
Has members.
Carries on activities primarily for the benefit of its members.
Financed by its members through membership fees, etc. It does not usually solicit donations from the public or receive government grants.
Requires at least three directors (board members).
Why Become a Non-Profit
Groups or organizations can decide if they want to be incorporated or not. There are some advantages to incorporating, but it also means the organization must follow specific laws and rules to comply with that govern non-profits. Incorporating will give an organization legal status. The organization can enter into contracts, buy land, hold bank accounts, etc. in their own name. It also means there is limited liability to members and directors, gives you access to government grants, plus the ability to bring legal action.
An unincorporated organization is more of an agreement between individuals and has no legal status. Members are personally liable to creditors.
How to Become a Non-Profit
There are certain steps that need to be done in order to incorporate as a non-profit. You’ll need a name, a place for registered office, directors will need to be decided on and how many are needed, plus restrictions on activities the non-profit can engage in.
Resources
For more information, we encourage you to visit the following websites. If you have any further questions, please do not hesitate to contact us.