3-3 Forming A Society

Charitable Status - Going all the way

All right! You guys mean business, and are going to go all the way - so whaddya need?

  1. Ya gots to do some research…
  2. Write a constitution - defines your organization vis-à-vis
    • name
    • activities
    • membership
    • bylaws (how things are done/changed)
    • types of meetings - board meetings, annual general meetings (AGM)
    • reporting to registering body - usually required by laws governing societies
    • duties of officers (directors) - legal responsibilities
    • etc.
  3. Figure out all requirements
    1. to become a registered society
    2. to apply for charitable status (the next level)
  4. Apply!

The best place to start with a constitution is somewhere else, I mean with someone else's constitution. Use it as a template to help you design yours. Note that every country/jurisdiction has its own legalities/requirements regarding establishing a society. So what do you get out of it?

Applying to become a registered society establishes your organization as a formally recognized legal entity, with the right to open bank accounts in its name, borrow money, invest funds, offset some financial liability from the members/directors (through insurance). During the course of organizational undertakings, events could arise where individuals or the organization itself can be sued for i.e. negligence, in the way that any company or individual could be sued. Note that directors/members are not allowed to benefit from the society's activities, but may be reimbursed for certain expenses; non-profit societies are essentially voluntary organizations (which may however employ staff).

As a registered non-profit society (which is what I'm talking about), you won't have to pay income tax on your eamings (from membership fees, events, fund-raising etc.) - these can all be ploughed back into your organization to promote your activities. You will be required to file an annual report with the Registrar of Societies, who is mostly interested in your money… where you got it and what you did with it - your report will have to include a Financial Statement. Typically your annual report is produced by the Directors (elected by the members at the AGM) who report their activities over the past year at the subsequent AGM for ratification, and then must file the report within a given period with the Registrar of Societies. Thus while you receive benefits, there are obligations… beware… if you fail to hold AGM's or fail to file reports you may be struck off the Society's List be dissolved by the Registrar and lose your legal standing. This does happen! (Most recently, [September 97] in British Columbia to an aboriginal legal services society - and their directors were lawyers!) So be warned, you must fulfil your legal obligations! Note that you may also be required to keep a list of members with home addresses and membership expiration date.

What about charitable status?

As a registered charitable society you will be able to give tax receipts for donations and possibly a portion of your annual membership dues. Plus you have much more cachet and credibility with potential financial donors (individuals/companies/foundations) - who like to get a tax receipt for their donations. So not only do you benefit, but your donor benefits by getting a tax credit. In this way your country supports its charitable societies by allowing some of the tax money it would otherwise have received be directed into your coffers. BUT, the requirements to become a charitable society are of course more stringent; there are more involved reporting requirements, and there are definitions on what type of activities are actually considered charitable… e.g. if your main activity is considered political, you may not be given charitable status -charitable status is more likely if your main activity is educational, religious….blah blah blah -Yup, this is where you have to figure it out! Contact your national revenue (tax) office. They will give you pamphlets and forms.

If this is the route you want to go, you could probably figure it out yourself, through research and analysis -but it is a good idea to talk to a lawyer who works in this area; sometimes they have essential insights and know the tricks of the trade. Again wording becomes paramount; using the wrong word, or expressing your activities the wrong way could prevent you from getting charitable status. But when you see a lawyer make sure you are fully briefed and have specific direct questions, to minimise waffling/'discovery' time and ultimate fee. Consider asking a lawyer to join your board… know any likely big-hearted candidates?

In addition you may be required to file a proposed budget or business plan for your organization; or if you've been in operation, your last few years financial records. Once again, note that every country/jurisdiction has its own legalities/requirements regarding establishing a non-profit society or charitable organization, and there may be self-help books that are produced (by another non-profit social agency) to help you work through the steps involved. Yup, we started and we'll end with some dry dull research… But, keep your sight on the road ahead - and - delegate! (Did I say that?)