Socially Motivated Organization Types and How they Differ

JUN 17, 2021

Rahul Gomes, Consultant, YSEC

A common myth, often repeated, has to do with the nature of socially motivated organizations. Since many organizations of varying type often have similar mandates, it takes a more nuanced eye to notice that the way they operate, while central to the type of organization itself, ranges vastly. In Canada, one such misconception exists with the nature of organization that are classified as Registered Charities, Non-Profit Organizations and Social Enterprises. Identifying the type of socially motivated organization one would like to create and run can go a long way in deciding the governance structures and operations that are integral to the sustainable success of the organization.

Registered charities are organizations such as public or private foundations that use their resources with the explicit intent of running charitable activities towards the alleviation of poverty, improvement in education, furthering religious purposes or benefiting members of the community. These organizations must apply with the Canadian Revenue Agency (The CRA) and be approved for registration as a charity. Once registered, a charity will be issued a registration number and can both receive donations and issue receipts for these donations. Registered charities are exempt from paying taxes and cannot use its income to personally benefit their own members. The Canadian Parks and Wilderness Society (CPAWS) is an example of a Canadian Registered Charity that runs programs aimed at conservation and conservation awareness.

A Non-Profit Organization (NPO) is an organization such as a club or association formed for the purpose of social welfare, recreation and pleasure, and civic improvement. These organizations are not charities and cannot operate for the purpose of generating a profit. Amateur sports organizations are an example of a non-profit organization that count as a club formed for the express purpose of recreation and pleasure. An NPO cannot operate solely for charitable purposes and, therefore, does not have to register with the CRA. As a result, these organizations cannot issue donation receipts. NPOs are also generally exempt from paying tax, except for property income or capital gains. Like registered charities, NPOs cannot use its income to personally benefit its own members. The Nature Conservancy Canada is an example of a private non-profit organization that seeks to conserve important natural areas and biological diversity across all regions of Canada.

A Social Enterprise generates revenue while attempting to meet its primary objective of generating social impact. Like all revenue generating organizations, a social enterprise can register as registered charity, NPO, sole proprietorship, partnership, cooperative corporation, or business corporation. The ownership, operations and governance of a social enterprise is determined by its decision to incorporate. Socially focussed social enterprises tend to register as registered charities or NPOs while commercially focussed social enterprises tend to register as a cooperative or business corporation. Future Ancestors Services is an example of a Canadian Social Enterprise that leverages professional services to advance climate justice and equity with a lens of anti-racism and ancestral accountability.

Once an organization and its leaders have identified their mandate, choosing the right organization type can help set a clear and ambitious vision and governance structures that set it up for success in the long run.

REFERENCES:

Image Source - https://www.aacsb.edu/insights/2020/october/instilling-social-responsibility-in-the-business-leaders-of-tomorrow

“Government of Canada.” Canada.ca, / Gouvernement Du Canada, 23 June 2016, www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors/about-registered-charities/what-difference-between-a-registered-charity-a-non-profit-organization.html

“Start, Build, and Grow a Social Enterprise: Start Your Social Enterprise.” Business and Industry, 8 May 2019, www.ic.gc.ca/eic/site/053.nsf/eng/h_00006.html