Non-profits and charities can be structured in a few different ways. The most common is to be a corporation without share capital. They have no shares or shareholders but members who vote for directors. Members don’t get dividends and (usually) don’t get any of the corporation’s assets if it dissolves.
These types of corporations must have a social purpose. All of their activities must support this purpose.
There are laws about how charities and non-profit organizations can earn money:
- Canada’s Income Tax Act says these organizations can only do certain activities to make money if they want to stay tax-exempt.
- If a charity carries on a business that doesn’t relate to its purpose (unless run mainly by volunteers), it can face penalties, including losing charity status.
- If a charity or non-profit wants to make money to support its mission, it may have to use a separate business corporation to do the activities. Learn more.