Different group structures

This page explains some, but not all, of the ways you can structure your group in Ontario and how the different structures relate to each other. It is important to understand the differences between these structures because each has unique advantages and disadvantages. Resources are not up to date for federal nonprofits.

Some group structures

This section defines some of the most common ways to structure your group and explains how they relate to each other. There are other kinds of structures that have been left out, like trusts and co-operative corporations.

If you do not incorporate, then you can be an unincorporated association.

  • An unincorporated association is a collection of individuals acting together.

If you do incorporate, you can incorporate as either a for-profit or not-for-profit corporation.

  • for-profit corporation is an independent legal entity whose purpose is to benefit its shareholders. It is also known as a “company” or “corporation with share capital”.
  • not-for-profit corporation is an independent legal entity whose goals do not include gain or profit for its members, although in some cases members can benefit (for example, a golf club). It is also known as a “corporation without share capital”.

Whether or not you incorporate, you may apply to the Canada Revenue Agency (CRA) to become a registered charity. However, if you are trying to incorporate at the same time, the CRA will not look at your governing documents (for example, letters patent) until they are approved.

  • A registered charity is an association or corporation that must use its resources for charitable activities and have exclusively charitable purposes. Charitable purposes include: advancing religion, advancing education, relieving poverty, and other purposes that benefit the community.

Whether or not you incorporate, when you file your taxes the CRA must decide if you are a non-profit organization.

  • A non-profit organization is an association or corporation that is not a charity and is organized for any purpose except profit.
Attention!
People sometimes talk about charities as a special kind of nonprofit. While it is true that some nonprofit corporations are charities, the Income Tax Act defines nonprofit organizations and charities as two completely different things that can never overlap.

Some practical differences between the structures

How are unincorporated associations different from corporations?

The article “Benefits and Disadvantages of Incorporating an Unincorporated Association” explains that unlike corporations, unincorporated associations:

  • are not legally independent from their members so do not protect them from liability
  • are not governed by a specific piece of law so offer a lot more flexibility but also less guidance to resolve disputes
  • do not have to file annual corporate forms
  • cannot enter contracts, sue or be sued, or hold property.

What is the difference between a for-profit and not-for-profit corporation?

A not-for-profit corporation is a corporation whose goals do not include gain or profit for its members. Any profit the corporation makes must be used towards its goals and not given to its members. A not-for-profit corporation has members, not shareholders.
A for-profit corporation or “company” has shareholders instead of members. Unlike members of a non-share capital corporation, these shareholders may get profits paid in the form of dividends.

How do registered charities differ from non-profit organizations (NPO)?

Some major differences include:

  • registed charities must have exclusively charitable purposes, whereas NPOs can have any purpose other than profit
  • groups must apply and be approved by the CRA to be registered charities
  • only registered charities can issue charitable tax receipts

To learn about the differences between registered charities and NPOs visit: What is the difference between a registered charity and a non-profit organization?

What about social enterprise?

Social enterprise is not an official legal status in Ontario at this time. For more information about how to structure a social enterprise with the options available, see Social Enterprise in Canada: Structural options.

For guidance on how to choose between structures, see Establishing a Canadian Non-Profit or Charity – Avoiding practical, legal and ethical problems.

Reviewed: August 2017