Setting Up a Non-Profit Organization
A non-profit corporation provides programs or services that are not aimed at creating personal financial gain and often benefit a particular social cause. Any profits made through its efforts, often called surplus, are used to advance the goals of the non-profit organization.
Non-profits are governed by the Non-profit Corporations Act in Saskatchewan, which is administrated by the Information Services Corporation (ISC). The Public Legal Education Association of Saskatchewan (PLEA) provides a comprehensive information package, called Non-Profit Organizations, which provides a good overview of the basic aspects of the Act.
TYPES OF NON-PROFIT COORPORATIONS
There are two types of non-profit corporations: membership and charitable. Membership corporations carry on activities that are primarily for the benefit of its members. Charitable corporations, while they still may have members, carry on activities that primarly benefit the public, and must designate themselves as a charity when they incorporate. To receive charitable status, an organization must follow certain procedures and meet particular criteria listed in the federal Income Tax Act (ITA). It must determine its designation as a charitable organization, public foundation or private foundation, before it can qualify for tax benefits and issue receipts for gifts received by donors.
REASONS TO INCORPORATE
An unincorporated association is created by an agreement between individuals and has no legal status. Members are personally liable to creditors.
Why should a non-profit organization incorporate? When a non-profit incorporates, it becomes a legal entity, similar to an individual. It permits transactions to be performed in the name of the organization, reducing liability to individuals and ensuring continuity.
Advantages to incorporating include:
- limited liability to the members and directors;
- access to government/agency grants;
- ownership of property regardless of membership change;
- ability to bring legal action; and
- continuity of the organization over time even with membership changes.
According to PLEA, an unincorporated association is created by an agreement between individuals and has no legal status. Members are personally liable to creditors. Legal claims and titles to properties will be in the names of particular members of the organization.
Once registered, a non-profit organization has a number of responsibilities. Non-profit organizations will normally have a membership, a constitution and bylaws. Under the Non-profit Corporations Act of Saskatchewan, members have certain rights, which include the right to: receive notices of meetings; vote at a meeting of members; election of directors; remove directors; confirm, reject or amend bylaws made by directors; change Articles of Incorporation; receive financial statements; appoint an auditor and have access to the organization’s records.
A non-profit organization is responsible for holding an annual membership meeting no later than four months after the organization’s fiscal year end. The financial statements and the auditor’s report, which will be presented at the meeting, must be sent to the membership 15 days prior to the date of the meeting. Members can exercise their rights at meetings. A minimum number of members are required to be in attendance in order to achieve quorum and approve decisions for the organization. Decisions are usually brought to the membership by the organization’s Board of Directors. A Director, who can be any mentally competent person aged 18 years or older and is not bankrupt, has particular duties in their role with the organization.
If the main objectives of an organization have disappeared over time or certain crises have impacted its operations, the non-profit organization may need to voluntarily or involuntarily dissolve its incorporation. According to PLEA, dissolving a non-profit corporation in Saskatchewan can be accomplished directly by the members, by outside authorities such as the Corporations Branch under The Non-profit Corporations Act, or by a court acting on a request.