Types of Non-Profits

A business corporation is formed to make a profit and to distribute the profit to its shareholders in the form of dividends. Business corporations are regulated by The Business Corporations Act which is administered by the Corporate Registry operated by Information Services Corporation (ISC).

A non-profit corporation, on the other hand, is formed to carry on activities for purposes other than personal financial gain. A non-profit corporation can earn a profit, but the profit must be used to further the goals of the group rather than to pay dividends to its membership. Most activities of a non-profit corporation are not of a commercial nature. Examples of non-profit corporations are sports groups, activity clubs, dance groups, daycares, and service groups.

The Non-profit Corporations Act, 2022 governs non-profit corporations in Saskatchewan. Non-profit corporations are also subject to all laws of contract, tort, employment standards, etc.

There are two types of non-profit corporations: membership corporations and charitable corporations. The different types have different responsibilities.

A membership corporation carries on activities that are primarily for the benefit of its members. It is supported by its members through fees, donations, loans, or any combination of these. Examples of membership corporations are golf clubs, social clubs, special interest organizations, daycares, etc.

Membership corporations:

• are usually financed by members through membership fees, loans, fundraising
• are primarily for the benefit of members
• require at least one director
• can have paid employees
• can allow members to receive any remaining property if the corporation is dissolved
  
• may invest its funds as directors think fit, subject to the limitations contained in any gifts and the articles or bylaws

• are usually financed by government grants, donations, public property
• are primarily for the benefit of the public
• require at least three directors
• can have paid employees
• cannot allow members to receive any remaining property if the corporation is dissolved
  
• have restrictions on how they can invest their funds
• have more stringent audit and financial review requirements

Even if it did not designate itself as charitable, a non‑profit will be considered to be a charitable corporation under the Act if it does any of the following...

• carries on any activities that are not primarily for the benefit of their members
• receives donations or gifts of money or property from the public in excess of 10% of its yearly income
• receives government grants in excess of 10% of its yearly income
• registers as a charity within the meaning of the Income Tax Act