|
Written by Urouj Rashid
JD Candidate 2027 Note: The below information does not constitute legal advice. No guarantees are made as to accuracy, completeness, or applicability to individual situations. If you’re looking to start a business venture and feel overwhelmed by all the information out there, you are not alone. Often, meaningful initiatives become victim to the complexity associated with getting started. In this two-part series, we aim to remove some of this complexity in getting started by turning your idea into a more concrete entity. Starting with an introduction to societies and non-profits, I will provide insight into the difference between the two, and some considerations when deciding which may be the best fit, with the next part focusing on incorporation. On of the main considerations on this journey of building a not-for-profit organization, the focus, rightly so, is often on the mission: the people you want to serve, the gaps you want to fill with your service, or the change you hope to create. While the mission and values of an organization cannot be ignored, an important practical question remains: what legal structure makes the most sense to the idea? Two commonly used options are incorporating as a society or as a non-profit company. While both can help launch a not-for-profit organization, they are not the same: they have their own processes and are structured slightly differently, each is governed by different legislation, and comes with its own pros and cons. As such, before you can get to working towards realizing your mission it is essential to choose the right fit. While this may seem like the boring side of this otherwise passionate journey, it is important to realize this step isn’t merely about the paperwork, it is about ensuring that the legal structure chosen is the one that will best support the organization’s core purpose, intended activities, and long-term goals. Starting with the Basics At its most basic level, incorporation is the process of creating a separate legal entity.[1] [2] Once incorporated, an organization exists as a separate “person” from those incorporating it and can act in its own name. In doing so, it can own property, enter contracts, and carry on its work as an entity distinct from the individuals behind it. [2] There are several ways to incorporate a not-for-profit, and the right path depends on what the organization is trying to do. This is why it is worth pausing at the outset to consider not just how to incorporate, but which type of incorporation best fits the organization being built. Non-Profit or Charity? One of the first distinctions to understand is the difference between a non-profit organization and a charitable organization. A non-profit organization is commonly incorporated under provincial legislation.6 7 Depending on the organization’s purpose and proposed activities, different Acts may apply, and the best option is usually the one that aligns most closely with the organization’s intended work and the community it hopes to serve. A charitable organization follows a different pathway. Charity registration is not handled at the provincial level. Instead, it must be done through the Canada Revenue Agency. [2] [10] This means the organization’s purposes must meet the CRA’s requirements for charitable status. That said, where the intention is to proceed as a non-profit rather than a charity, the more relevant question is which non-profit structure is the better fit. There are a number of ways a non-profit can be organized, including societies, non-profit companies, religious societies, agricultural societies, and cooperatives. Of these, two of the most common options are societies and non-profit companies. Each offers a legitimate route forward, but they are designed with different types of organizations and their subjective goals in mind. Society In Alberta, a society is incorporated under the Alberta Societies Act.[1] For many organizations, this is the most familiar and accessible option. It is generally simpler, less expensive, and often well-suited to groups focused on community service, recreation, culture, advocacy, or charitable work. Five members are required to form a society, who typically go on to become the board members. [1] [2] The society must be formed for a purpose that is social, recreational, cultural, or charitable in nature and intent. One important point, however, is that a society is not meant to operate as a business. While societies can have some business-like qualities, such as own property, entering contracts, or overall functioning as a legal entity, incorporating as such would not be the right option if you intend to sell goods or services. That said, if you truly intend to operate as a society not only would this not be an issue, but it would also align with the mission. The only time this restriction may become problematic is if your intent or expectation is to generate ongoing revenue through operations. There are additional steps to consider when incorporating, such as obtaining a NUANS report to support that the intended name for the society is available as well visiting an authorized Level 2 Corporate Registry service provider to incorporate formally. Non-Profit Company A non-profit company, on the other hand, provides a structure more suited for organizations that ARE intending to be involved in business or trade activity, and are incorporated under the Alberta Companies Act.[4] [5] This structure allows for noisiness like operations that result in raising funds and generating profit, but any revenue generated by a non-profit is directed back to the organization and intended to further the mission and purpose. [5] [6] A further distinction is that non-profit companies can be set up as either private or public companies. Incorporation of private non-profit companies require at least two members, can have up to 50 shareholders or members, and it comes with some restrictions on membership.[7] Incorporation of public non-profit companies require at least three people without the same restrictions on membership.[7] A public structure is often found to be useful where an organization expects to operate in a more commercial space while still pursuing non-profit goals. There are even situations in which organizations choose to adopt a multi-layer approach, such that they incorporate as a society to hold the broader mission and then create a private non-profit company to run the business side of operations within that scope. Not only does such an approach help manage risk, but it also allows the society itself to continue operations even if the business side does not succeed. Why Care? Now, getting to the relevance of this all. Why does any of this matter? In the simplest way, the choice you make about which structure to adopt affects what the organization can do, how it can grow, what considerations should be made, and potential limitations to be mindful of. A society may be an appropriate fit for more community-based organizations which are not intended to involve significant commercial activity. Its straightforward structure and affordable route are some of factors that continue to make this a popular choice for individuals starting off. A non-profit company may be the better option where the organization has some more flexibility in their possible operations, including the ability to generate revenue within the same incorporated structure. While these are a bit more complex to establish, the flexibility and ability to use funding to realize their goals makes it a worthwhile trade. In any case, it is worth taking the time early on to think carefully about the organization’s purpose, how it plans to operate, and whether it expects to engage in any meaningful business activity and act accordingly. A clear mission is essential, but so is a structure that allows that mission to thrive. Ultimately, it is not necessarily a choice between the better or worse option, but the determination of which option is best aligned with the intended purpose and outcomes of the corporation.
0 Comments
Leave a Reply. |
BVC BlogsBlog posts are by students at the Business Venture Clinic. Student bios appear under each post. Categories
All
Archives
March 2026
|
RSS Feed