Non-profit organization

How BC law treats it

"Non-profit" describes a purpose, not a single legal form. In BC the usual vehicle is a society incorporated under the Societies Act, SBC 2015, c 18, which came into force on November 28, 2016 and replaced the old Society Act. A society files its constitution and bylaws with the BC Registry, holds annual general meetings, files an annual report with the registrar, and cannot distribute its property or profits to members. A group may instead incorporate under the federal Canada Not-for-profit Corporations Act, SC 2009, c 23, or remain an unincorporated association. The Business Corporations Act, SBC 2002, c 57 (BCBCA) governs for-profit companies, not non-profits. Income tax exemption comes from the federal Income Tax Act, which BC's provincial income tax follows. Under the federal Income Tax Act, RSC 1985, c 1 (5th Supp), s. 149(1)(l), a club, society or association organized and operated exclusively for a non-profit purpose, and not a charity, is exempt without applying. Some must file an annual information return (Form T1044). A charity is a narrower category. It must have exclusively charitable purposes and register with the Canada Revenue Agency under s. 149.1 to issue official donation receipts. A non-profit organization cannot issue donation receipts, and a registered charity faces stricter rules on its activities and spending.

What it means for your business

Founders of industry associations, community groups and social enterprises need to choose the right structure early. A society cannot pay dividends or return surplus to members, so it does not suit a venture that hopes to reward investors. Tax exemption can be lost if the organization earns profits that are not incidental to its purpose. Businesses that sponsor or partner with non-profits should confirm whether the organization is a registered charity before expecting a donation receipt. Example: A group of Okanagan wineries forms a society to market the region. The society is tax exempt as a non-profit organization, but members cannot receive donation receipts for their fees because it is not a registered charity.

Risks and common mistakes

Assuming non-profit status means the organization can issue charitable donation receipts. Citing the repealed Society Act instead of the Societies Act. Using a society for a venture whose members expect a financial return. Failing to file the society's annual report, which can lead to dissolution. Missing the federal T1044 information return where it is required.