Incorporating Not-For-Profit Organizations: Is it worth it?
There are a myriad of groups that support brain injured individuals in this province and they come in all shapes and sizes. Located from Peace River to Port Alberni, these groups must decide how they will structure themselves and run their organizations. Having recently had the pleasure of working with Ms. Tina Suter and her New Westminster support group as it transitioned into a non-profit society called B.R.A.I.N. (Brain Resource Advocacy Information Network), I thought I would share some of the challenges that this group and others might have in deciding on an appropriate structure. While supporting individuals with brain injuries is obviously the goal, sometimes the structure of an organization can assist in achieving that goal, so deciding how to formulate the organization is important.
There are three essential forms that an organization can take:
· proprietorship, club or group
· society or non-profit
· corporation or for-profit organization
I will describe each of these organizational structures quite briefly and include some general tips on organizing a society.
Proprietorship, club or group
Without getting too fancy, this type of organization is not registered, either as a society or a business. These groups can be extremely simple or quite complicated. For example, in a support group, the people who organize it, or by choice, those who participate in it can dictate whatever form they wish it to take. The benefit is flexibility, as those who care to organize the group can dictate its form.
In general, while this form is very flexible and offers individuals or groups the ability to do whatever they please, in the eyes of governments or other large organizations it is not always seen positively as there are no requirements to account to outsiders for activities or money.
· no strict or formal accounting or legal requirements
· group organization can be by any method
ie: consensus, dictatorship or the smiles on a full moon
· no legal status, individuals are personally responsible for accounting for profits or liabilities
· sometimes less public acceptability because it can be governed by any method (even a full moon)
Not For Profit Organization/Society
A society is not a scary thing, it simply means a group of individuals has decided to register their group as a society and follow the provincial rules that arise in accordance with that decision, as set out in the B.C. Societies Act. Societies can also be incorporated federally, when a national mandate is required.
A society is formed by at least 5 people who become members. They draft or submit a constitution which sets the rules for what the society will stand for and how it will be run.
The constitution consists of the “Objects” which set out the mandate of the society and what it promises to do. For example the Objects may state that the society intends to offer counselling and support to brain injured individuals in the Nanaimo region. Constitutions are purposely difficult to change so governments and funding bodies know that the society has to live up to certain promises. Often the Objects state that the society will conduct its business without the intent of generating profits (which is why societies are sometimes referred to as “Non-Profits”). Sometimes the Objects state that the society will, if it ever dissolves, insure that all of its money goes to a chartitable organization. These are part of the requirements that allow a society to apply for status as a charitable organization. Charitible organizations may provide tax deductable receipts for personal donations (why some societies are called “charities”).
The second part of the consitution is the “by-laws”. By-laws are simply the rules and mechanisms by which the society is governed. Societies can either draft their own or adopt the by-laws set out in the provincial government regulations. Even if the society drafts its own, it must conform to certain requirements. For example, it is required that a society have an annual general meeting, where all members are invited, so that the organization’s activies, budgets and governance can be discussed. By-laws set out who can be a member of this society and how that occurs. For example, membership can be open to all survivors and family members who request membership, or the membership can be closed and new members have to be voted in.
From the members, a board of directors, or board, is elected. The board is responsible for governing the agency on a day-to-day basis. Depending on the size of an organization, the executive director, who may or may not be paid as an employee, or member of the society, reports to the board and takes his or her guidance from the board. All other employees or volunteers report to the executive director.
In this way the executive director, who is hopefully paid, reports to a group of board members, who are not.
This entire system has some requirements for annual reporting to the government, for example who the board of directors are and the financial status of the society. The purpose of this entire structure becomes clear as the society seeks such things as charitable status from Revenue Canada, or funding from government or other organizations. These organizations rely on the requirements the society has set out for itself in its Objects and bylaws in order to ensure that the society it is an open and fair organization. While a society may be able to structure things in the way it chooses, ie how many members, funding agencies (for example provincial gaming) will provide funding to organizations that meet certain number requirements (like minumum number of members). These are important considerations when starting the society. For example, most municipal governments will only provide funding to societies where board members receive no remuneration and no employee sits on the board. As I have already stated, Revenue Canada has specific requirements for it to allow an organization to have charitable status.
· legal recognition
· credibility through constitution and annual reporting requirements
· seems to have good governance model
· more formal requirements
· some set-up costs
· annual legal and accounting costs
I will not be discussing the corporation in great detail in this article because it is a structure less applicable to brain injury organizations and groups.
In fact, a corporation is not significantly different from a society. The corporation is also organized with a governing board of directors and the titles of the positions of the board of directors for both the corporation and the society are usually the same. There is usually a president, a vice-president, a treasurer and a secretary. These are senior members of the organization who have specific responsibilities in both circumstances.
The major difference is that the corporation is set up with the purpose of serving its shareholders often through the generation of profits and is not usually the vehicle of choice for those operating brain injury organizations or groups. The society is much more focused on the community and supporting groups within the community.
Considerations for Not-for-Profit societies
The creation of a not-for-profit is relatively simple, and can be done with the forms found through the site listed above. There are some important considerations which must come prior to creation of the society. Here are some general considerations and pitfals common to Societies which you may wish to answer:
- Who will be the founding members (or directors)?
- Who will the society be open to?
- Who will serve as directors in the future and how will they be recruited
- What will the society’s purpose be? This is agreed to by the founding members, but will the other constituants agree?
- What will the society do? Consideration must be given to expressing the purpose clearly and to allow flexibility.
- Are the purposes and membership forward thinking? Do the membership requirements and purposes allow for growth and evolution as situations change
- Are finances in order?
- Is a realistic budget in place which considers the needs of the society for incorporation and annual filings as well as for programs, fundraising etc
- Are there adequate physical resources, for meetings of the membeship, including the annual membership
- Is the location specified in the name or objects, if so this can assist or detract in seeking support (for example the Port MacNeil Brain Injury Society will probably get little help from the Ladysmith town council)
- Is the name appropriate. To be accepted it should be distinctive and in some way illustrative of the organizations purpose. Hopefully, as your organization grows, your name should become one of your major (non-financial) assets.
A society is a mini-community, and is one of the constituents of our general society. As your society grows, so does ours.