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A registered charity is a special type of not-for-profit organization or corporation. Unlike a regular not-for-profit, a registered charity may:
- Issue tax receipts
- Receive donations from other charities
- Not pay income tax
- Be exempt from charging HST for many services
- Be eligible to claim tax rebates for HST paid
Another important difference between a regular not-for-profit corporation and a charity is that when you close a charity you must distribute all of the remaining assets to other charities. The assets cannot be distributed among the former directors, members or officers of the charity.
Note: Generally a charity that is located in Ontario cannot pay a director for their services. Contact the Ministry of the Attorney General at 1-800-518-7901 for more information.
Purposes of a charity
Your not-for-profit organization will only be eligible for charitable status if its purpose is considered “charitable.” The aims of a charitable organization may be:
- Poverty relief
- Advancement of education
- Advancement of religion
- Certain other purposes that benefit the community in a way that the courts have said is charitable
For more information about what counts as charitable activity, read online:
What is charitable?
Types of charities
Your charity may take one of three forms:
- Charitable organization: Primarily carries out its own activities and receives funds from “arms-length” donors (e.g., independent individuals who are not related)
- Public foundation: Generally gives more than 50% of its income to qualified donees (usually other charities) and receives funds from arms-length donors
- Private foundation: May carry on its own activities and give some of its income to qualified donees (usually other charities); is directed by and receives funds from non-arms-length individuals (e.g. family)
Registering a charity
The Canada Revenue Agency (CRA) oversees the registration of charities for official tax-exemption purposes. To register your charity, you must apply using the T2050 - Application to Register a Charity Under the Income Tax Act form. The CRA provides several resources to help you learn about the registration process and determine if registration is the right option for your organization. You may also want to contact the CRA directly before applying for charitable status.
Contact the CRA Charities Directorate:
Registering a charity
Many charities choose some form of not-for-profit incorporation, which brings limited legal liability. If you incorporate your charity, your organization’s aims need to meet the definition of charitable activities and must be included in your incorporation documents.
- Provincial not-for-profit incorporation for charities in Ontario
Ontario charities have two options for incorporating in the province: pre-approved and non-standard. The Ministry of Government and Consumer Services provides more detailed instructions on incorporating a charity in Ontario.
Start, run and change a corporation - Incorporate a not-for-profit
- Federal not-for-profit incorporation
For information on creating a federal not-for-profit corporation, visit the Corporations Canada website.
Creating a not-for-profit corporation
For more information on charitable status and other business topics, contact Small Business Services today. Telephone services are available in English or French.