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Incorporation Fact Sheet

What is Incorporation?
Incorporation is the process in which an organization registers itself with the province (or in the case of a federal incorporation, with the federal government). This registration results in the creation of a legal entity that has an independent existence, apart from its membership. This means that once the organization is incorporated, it can own property, carry on business, contract its services, as well as sue and be sued in its own name.

Do Voluntary Organizations Need to Incorporate for a Non-Profit Status?
A voluntary organization does not have to incorporate to be considered under the law as a "non-profit" organization. However, incorporated non-profit groups have a considerable advantage over unincorporated groups, particularly when it comes to funding and liability issues.

What are the Advantages of Incorporation?
There are many advantages to incorporating your organization. They include:

• Limited Liability for the Membership and Board
  Provided the directors of the organization act reasonably and within the law, their personal liability for the actions of the corporation is limited.
• Direct Access to a Greater Number of Funding Sources
  Most government departments and foundations will only directly award funding to organizations that are incorporated. For example, many funding sources will ask an organization to state their Ontario (or Canada) Corporation number and/or provide a copy of their incorporation documents.
• Incorporation Allows Continuity of the Organization
  If the directors and officers of an incorporated organization change, the organization can continue to do its ordinary business under its corporate name. The organization does not die with the resignation of directors or other principal members.
• Defined Legal Roles and Responsibilities & Greater Accountability
  In an incorporated organization, there are very definite roles and responsibilities prescribed by law for the directors. The law provides for mechanisms to ensure democratic control by the organization's membership, as opposed to the board alone.
• Greater Appearance of Legitimacy and Stability
  Incorporated organizations give the appearance of greater stability and stronger organization than unincorporated groups.

Are there any Disadvantages to Incorporation?
There are some important disadvantages to incorporation that organizations need to consider before making this decision. They are:

• Registering and Maintaining Corporate Status is More Costly
  The cost of incorporating your organization can mean several hundreds of dollars to search its name and register it with the province or federal government. Even if the organization s members try to complete the process themselves, the procedures involved can be time consuming and lead to confusion.
• More Record Keeping is Required
  Incorporated organizations are required to maintain more records, such as a list of members, by-laws passed by the member, minutes of meetings, among other items.
• More Restrictions in Activities Carried Out by Incorporated Groups
  Incorporated organizations can generally only act within their own objects (or stated purposes listed on the incorporation documents), their by-laws and any applicable legislation. When drafting corporate objects, this issue needs to be considered to ensure some flexibility in structuring the corporation s activities. If the corporation is seeking charitable status, such objects can be more restrictive.
• More Steps Involved in Winding Up the Corporation s Activities
  When its members wish to discontinue operating the organization, they cannot simply walk away and expect the corporation to go away. The legislation prescribes certain steps that must be taken in order to wind up the corporation, thereby releasing the directors of any possible further liabilities.

What is the difference between a Charitable and a Non-Profit Organization?
A non-profit or voluntary organization is any group of people that wish to work together to achieve a common purpose for which there is no personal gain for the members. Such a purpose can include anything that can be seen to benefit a larger group of people than the organization's founders in a non-commercial way. Examples of such purposes for a general non-profit organization can include the promotion of a particular sport, provision of housing for Ukrainian senior citizens or protection of the environment. A charitable organization, on the other hand, is a non-profit organization that is set up for special purposes that grant it specific privileges in law. Not all non-profit organizations qualify for charitable status, although all charities must be non-profit organizations. By law, a charity must be set up for any one of the following purposes:

1. relief of poverty;
2. advancement of education;
3. advancement of religion; or
4. any other purpose benefiting the community, but not falling under any of the other three purposes.

Groups that promote political objectives, provide benefits geared to only its members (e.g. a professional association) or promote athletics do not qualify. However, an organization providing emergency food or shelter to low-income persons, conducting research and public education into breast cancer or supporting victims of disaster can obtain such status. The benefits of charitable status are many. Among them, the organization can issue tax receipts to donors, access additional sources of funding (e.g. United Way, charitable foundations), and benefit from various trusts and bequests issued in their name.

How much does it cost to incorporate?
The filing fees would vary according to whether you wish to incorporate federally or provincially, seek charitable status, or access the standard or expedited procedure. Fees for disbursements alone will range from $155 (Cdn) to over $500 (Cdn). This will be in addition to any consultation or assistance you might obtain to complete the paperwork. Average fees for such assistance can range from $500 to $1,500, depending on the complexity of your organization.

Produced in partnership with Research & Development International Incorporated, a Niagara-based management,administrative and paralegal consulting firm.