Many charities and not-for-profit organizations start with a dream.
But to make the dream a reality and develop a successful, sustainable organization, consider some advice from Manning Elliott partner Catherine Miller, CPA, CA.
“Anybody can have a dream and start an NPO [non-profit organization],” says Miller, who specializes in the not-for-profit sector and has many years of experience working with various NPOs, charities and foundations.
Is it a not-for-profit or a charity? There are some differences, but Miller says the most important difference is that a charity can issue a donation receipt and an NPO cannot. The definition of an NPO is broader, however.
“Your NPO should either be doing social welfare, civic improvement, social or recreational activities, or really anything else that is not-for-profit,” says Miller.
Once you have your idea, you should consider these five things.
1. Does the proposed organization fill a need?
“The person should make sure that there’s a need for that NPO, that there is not another one out there that is doing the same thing,” says Miller. There are a lot of organizations out there, and one may already do similar work, so try to fill a gap.
That said, there is usually opportunity out there to fill a needed niche, and many organizations do very specific work.
“Given the current economic and social climate, I believe there are many opportunities for new NPOs to be created.”
2. Recruit volunteers
Try to avoid being a one-person show. Miller suggests recruiting some volunteers to help bring your dream to reality, which helps divvy up the work and supports the long-term sustainability and growth of the organization.
“There are many NPOs that are driven by one individual with very limited support,” says Miller. “It’s important to build a dedicated support team around you who can assume control of operations in the event you aren’t able to.”
3. Have a plan
Before you swing into action, make sure you have a plan in place to help get your brand new organization up and running. For many, the most important action item within their plan is sourcing capital.
“If you start an NPO, you need capital, so what are you going to do to raise that capital?” Whether it’s a gala event or a bottle drive, have a plan to raise the seed money to get things started.
4. Consider incorporation
Miller suggests incorporation, even though it isn’t strictly necessary. The incorporation will create a legal entity separate from its members and board of directors.
“You do not have to register or incorporate an NPO. However, if you do go this route, the members and directors of that NPO are liable, so if there are unpaid bills, creditors can come after the members and directors of that NPO for payment, so it’s always a good idea to incorporate.”
For NPOs operating locally in B.C., you can incorporate under the provincial Societies Act. If you are planning to operate your NPO outside of B.C., Miller suggests incorporating federally.
Miller also urges people to enlist the services of a legal professional, such as a lawyer who specializes in NPOs, to ensure the setup of the organization is properly structured.
5. No commercial activity
Miller says it is important to avoid conducting activities that the Canada Revenue Agency (CRA) could consider a commercial activity.
She used the example of a not-for-profit sports club that sold advertising around its playing grounds.
“The CRA concluded that selling advertising space was considered a commercial activity, resulting in the NPO having to pay tax on the revenue they received from the sales.”
She encourages people who are considering starting an NPO or charity to partner with a professional services firm, preferably one that specializes in the not-for-profit sector, to ensure all activities comply with CRA regulations.
