Hi
I am wondering if Regular/Standard/Profitable Corporation can be convert to Non Profitable/not for Profitable Corporation?
If so then what would be the procedure?
Thank you
Sincerely
Jay Gandhi
What does that have to do with a T1-OVP?
Would this be better as a brand new topic? Your corporate tax return question probably not get the appropriate attention when it is placed in a topic pertaining to a personal tax return.
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I doubt that this would be feasible, if possible. A not-for-Profit corporation has very different requirements for directors, bylaws, etc. from a for profit corporation. it is not exactly easy to register for NFP corp; you should read up on NFP corps on CRA website.
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You would, most likely, and in most provinces, need a new form of corporation (a “non-share” corporation - Sec 9 of the BCA in Alberta for instance) or a society to be your non-profit vehicle.
And no, you can’t just change a regular corporation into either of those. Well, you might be able to do the non-share change, but it’s not gonna be cheap. You’d be better off with a new corporation done properly.
…and, FWIW, this is a Corporate Law, not a “tax” issue per se.
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Yes. This is the answer.
I’ve had clients want to do this, and after consulting with a lawyer it was found to be better to start a new non-profit organization and dissolve the old corporation. How you transfer assets is where tax issues can come into play, and you’re best to make sure you have a lawyer involved or REALLY know what you are doing.
Given the experience of the last 3 years, I suspect a lot of us have clients who are now not only non-profits, but are negative-profits. Not by design nor by choice.
But that does not automatically allow them to become not-for-profit even though this is how they turned out.
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Yes, I know. So many people get these hare-brained ideas that owning a business is a license to print money. Only after investing all their personal assets and mortgaging their home does it sink in that it’s never going to happen.
Then there are the non-profits who seem to accumulate barrels of money and pay their executives like they’re the national head of the TD Bank. It’s a bit ridiculous how much some registered charities spend on fundraisers, or their executive salaries. I remember seeing how much the Canadian head of the Salvation Army is paid. And, it’s all above board. There isn’t that much difference between a non-profit and a charity aside from the ability charities have to give their donors a good tax break. Then at the other end you have a mom & pop operation trying to eke out a honest living from a corner store.
The following is a bit of clarification as terms above seem to be used interchangeably when they are in fact distinct, specific, and regulated.
Trusts
Trusts are different and distinct from profit corporations and self employed businesses.
There are many types of legal trusts in Canada. They are either testamentory or in-vivos. Each is regulated and subject to rules, controls, reviews, and audits.
Non-profit and registered charities
Non profits and registered registered charities are two special types of trusts. They are distinct and follow specific rules and reporting requirements.
Private family trusts and other legacy or asset controlling situations:
Each situation is distinct. Tax laws change over time. Rules, regulations, and economic conditions change over time. It is useful to have
When a business is considering a private trust vs a corporation there are often complex tax planning and legacy considerations. It is best to study this in depth and consult a range of trust, tax, wills, legacy financial experts, investment bankers, and high net worth banking specialists before jumping into such financial, legal and tax endeavours. In some cases the path may be well worn such as for farmers and owners of small private corporations. In other cases this can be extremely complex and full of pitfalls and multiple tax and country jurisdictions such as the case of the four generations of the BATA Corporation. Many business owners and family members take legacy and succession planning courses and workshop to familiarize themselves with the topic even before consulting experts. In the late 1990’s, the liquid assets or on-going net income had to be in excess of $10 M to even begin consideration. I don’t know what the dollar value or other threshold is now. In Toronto I saw large privately owned real estate portfolios rolled into private family trusts. In Calgary, I have seen some of the assets of farms, ranches, resource royalty rights, and small private businesses rolled into trusts. Trusts or sometimes multiple trusts are used by high net worth individuals for various reasons. These are commonly used by tech hundred millions, elite athletes, performers, and others.
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