Thinking about starting a charity in Canada?
Registering your charity is one of the most gratifying things you can do for your community. However, it can be daunting. Paperwork, legal stuff, long waiting periods. Ugh.
Here’s the good news:
Registering a charity doesn’t need to make you pull your hair out. Follow this step-by-step roadmap and you’ll be fine.
Let’s jump in!
Here’s what’s inside:
- Why Register A Charity In Canada?
- The 5x Step Roadmap To Register A Charity
- Common Mistakes To Avoid
- What Happens After Registration?
Why Register A Charity In Canada?
Canada has a large charitable sector. There are about 86,000 charities in Canada today. This number fluctuates annually as new charities are created.
Why do so many people register a charity? Because the benefits are huge:
- Issue tax receipts to donors for their contributions
- Access grants from foundations and government programs
- Build credibility with the public and partners
- Qualify for tax exemptions on your organization’s income
You cannot do any of those things unless you register officially. That makes raising the money you need to further your cause much more difficult.
It’s not fast either. In fact, most applicants should expect to wait a while before they get your charity registered with the CRA. Charity registration applications can take anywhere from 4-8 months to process at the Canada Revenue Agency, though more complex situations can take longer than that.
However, each step is worth it when you see the opportunities that arise when you register.
The 5x Step Roadmap To Register A Charity
Ready to get started? Here’s the step-by-step process to follow.
Step #1 – Define Your Charitable Purpose
Number one CRA examines is Purpose. Your charity must fall under one of four purposes:
- Relief of poverty
- Advancement of education
- Advancement of religion
- Other purposes beneficial to the community
Sounds simple, right? Not quite.
Your objects need to be precisely worded. Vague or overly broad objects are one of the leading causes of charities being refused. Put in the effort to write objects that fall into these categories.
Step #2 – Choose Your Legal Structure
Next up: legal structure. There are three main options to choose from:
- Corporation (federal or provincial)
- Trust
- Unincorporated association
The majority of charities incorporate as a corporation. Why do this? The reasons being, liability protection for directors and an established structure of governance. Canada Not-for-profit Corporations Act allows for quick federal incorporation online.
Trusts and unincorporated associations are easy to form. However they do not provide any asset protection. Choose wisely.
Step #3 – Draft Your Governing Documents
Every charity needs governing documents that spell out how it will operate. This includes:
- Articles of incorporation
- Bylaws
- Statement of purpose (objects)
Documents must be drafted carefully and in compliance with charity law. If there is one offending clause, the CRA can deny your application.
Tip: Start with the CRA’s model objects. They’re CRA-approved out of the box.
Step #4 – Complete Form T2050
Application Form T2050 is your primary form. Let’s dive into the weeds. You need to provide details on:
- Your charitable activities in plain language
- How you’ll spend your money
- Who your directors are
- Whether you plan to conduct activities outside Canada
- Your fundraising strategy
Provide as much detail as possible. Details eliminate follow-up questions. Follow-up questions lead to lengthy delays.
Step #5 – Submit And Wait
When you’re all set up, file your application electronically through the CRA’s My Business Account portal. Paper applications have not gone away, they just take a lot longer.
Now the waiting game begins. Use this time to:
- Set up your accounting systems
- Recruit board members
- Plan your first fundraising activities
- Build your website
By the way – you cannot issue tax receipts until the CRA approves your registration.
Common Mistakes To Avoid
Simple errors are the downfall of most charity applications. Learn about the biggest ones here.
Vague Purpose Statements
The CRA wants to know precisely what your charity will accomplish. Vague statements like “helping people” won’t cut it. Be specific – who will you help, how will you help them, and why is it charitable under the law.
Political Activity Overreach
Charities can do some lobbying. However there are major restrictions. If your application appears too political, it will be denied. Do your charitable work first.
Poor Financial Planning
The CRA wants evidence that your charity can function. Fuzzy budgets and pie-in-the-sky fundraising plans won’t cut it. Provide detailed financial forecasts for the first two years.
Missing Documentation
Details matter. If you’re missing one piece of evidence your application can be delayed for months. Please cross reference with CRA’s checklist and triple check your application before sending.
What Happens After Registration?
Congratulations – your charity is officially registered! But the work doesn’t stop there.
Being a registered charity comes with ongoing responsibilities:
- File T3010 annually with the CRA
- Maintain proper books and records for six years
- Follow fundraising rules set out by the CRA
- Report any major changes to your structure or activities
The Canadian charity sector is vast. There was $439.1 billion in total revenue for Canadian charities according to the most recent sector snapshot. That’s billions of dollars flowing through the sector annually and CRA treats compliance with high importance.
Miss a filing deadline and you risk having your registration revoked.
Don’t let this happen to you: Effective immediately, charities who do not file their T3010 for three consecutive years will automatically lose their registration. Mark your calendars. Treat this deadline seriously. Your organization’s survival depends on it.
Bringing It Home
Registering your charity in Canada is no small task. However, once you realize the benefits your charity can provide to the community it is worth it.
To quickly recap the roadmap:
- Define a clear charitable purpose that fits CRA categories
- Choose the right legal structure for your charity
- Draft governing documents that comply with charity law
- Complete Form T2050 with detailed, specific answers
- Submit and prepare for a 4-8 month wait
It’s not an overnight process. However, once you complete registration your charity will have the legitimacy, tax exemptions, and fundraising capabilities to truly help.
One day at a time. Stay on the roadmap. Before you know it, your charity will be registered and ready to go!
