The Pemba tree-planting project grew very quickly. As more and more villagers joined the movement and more trees were planted I realized that we needed to put an organization behind the grassroots effort in order to continue to build momentum. I’d never worked for an international development organization. Hell, I’d tree-planted, bussed tables at a restaurant and painted houses for a summer. What did I know about starting an international organization? So I did what anyone would have done.
I googled ‘how do you start an NGO?’.
So the first thing I learned is that there are several different types of organizational structures out there, which are basically divided into two types: for-profit and not-for profit. Not-for profit organizations are the most popular vehicle used to drive community change. Although not-for profit organizations can conduct almost any type of activity, the laws that govern not-for profits prohibit ownership. Basically where a for-profit would have shareholders and owners with an equity stake in the company, not-for profits have a volunteer board of directors that ensure that profits are used to carry out the organization’s mission. In a not-for profit the board of directors cannot be paid.
In hindsight, here’s the deal with not-for profits
• Improved public profile – people will know you’re working for social change
• Can apply for some grants – some grants are open to not-for profits
• Mission Driven – a good board of directors can build a powerful organization
• Tax advantage – you don’t pay any taxes as all profits are reinvested in your mission
• Cannot issue tax receipts like a charity
• Cannot receive funds from foundations
• Banks will not lend you money! Even getting a credit card will be a hassle
So once I’d done a bit of research I rounded up 2 very committed friends, Daimen Hardie and Zach Melanson and we incorporated a not-for profit. If you decide to start your own organization, and you’re Canadian head over to Industry Canada’s Creating a Not-for profit Corporation site. http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04970.html
CFI Founders Zach Melanson, Daimen Hardie and Jeff Schnurr
You’ll need a few things.
1. A signed copy of Form 4001 – Articles of Incorporation
Form 4001 asks you what your organization’s name, your mission, what your main activities are and what you plan to do with your assets if you go bust
2. A completed and signed copy of Form 4002 – Initial Registered Office Address and First Board of Directors (See available instructions) ;
Form 4001 asks you where you’re located and who your directors are. You need at least 3 directors and these individuals cannot be paid for their work. Zach, Daimen and I were the original directors of Community Forests International, but as our organization grew we recruited new board members and became officers of the organization.
3. A NUANS Name Search Report for the proposed name that is not more than 90 days old.
A name search report is meant to protect your company. It’s a search of a federal database that confirms that no other organization is using the same business name that you’re proposing. This basically protects you (and other companies) against fraud and organizational impersonation. In the past, I have used www.AtlanticNameSearch.ca or www.corporationcentre.ca
This is the first fee of many you will pay over your organization’s career. $250.
Once you get this done you’ll have to put bylaws (the document that governs your organization together). Looks like there’s now a bylaw builder on Industry Canada’s website. When we started there was no such thing and many painful hours were spent drafting laws and making decisions on things we didn’t understand. Bylaws can be changed though – a good job for your first board of directors!
CFI's Headquarters in Sackville, NB
So we founded Community Forests International as a not-for profit. The next step we took was to work towards charitable status, which allows you to issue tax-receipts to donors and apply for grants from foundations. This process took about a year. You have to prove that your organizational objectives meet one of the following:
· The relief of poverty
· The advancement of education
· The advancement of religion
· Other purposes beneficial to the community in a way that the law regards as charitable.
We ended up going with the last objective and tried to hit one and two. In the end our objective ended up as preservation and the beautification of nature for the well being of society. If you want to go the charitable route head over to the Canada Revenue Agency’s website http://www.cra-arc.gc.ca/chrts-gvng/chrts/pplyng/menu-eng.html
If you fill out the lengthy form, jump through the hoops and get rejected, don’t despair. We were rejected too. All you do now is appeal in writing and spend around 100 hours on the phone with the Canada Revenue Agency (CRA) explaining exactly what you want to do. None of your activities can provide private benefit (aka no individual can receive $$$ from your programs) and all affairs must work to improve society as a whole. In order to provide you with this privileged tax status the CRA will leave no stone unturned. But it can be worth it if you hope to raise funds through private donations and foundations. I will also add that I imagined that as soon as we got out charitable status the donations would start flooding in. That wasn’t the case at all. If you’re going to raise money through private donors as either a charity or a not-for profit, you’re still going to have to cultivate donor relationships and provide potential supporters with a sense of ownership in your organization. For more on fundrasing check out my post on "How to fundraise".
Here’s the low-down on charities.
• High public profile – people will know you’re following high standards
• Can issue tax receipts which may encourage donors
• Can apply for all grants – other charities and foundations can support you
• Restricted to approved objective (new activities must be approved)
• Rigid reporting and filing requirements mean more paper work!
• Just being a charity won’t solve you’re fundraising problems, it’s just the beginning
After a year long process Community Forests International was now a charity. The only problem was that I’d bid on some trail building work that we could have done as a not-for profit but we received charitable status the same week we won the trail building contract. So I called the CRA and asked if a charity could start a corporation. The guy on the other end of the line laughed and told me that although it usually happened the other way around, I could start a for-profit as long as the companies were at arms-length. This means that the majority of the new company’s owners couldn’t be board members of CFI. Done. So I went back to Industry Canada’s website, got another NAUNS report and registered Community Forests Canada Inc. as a for-profit. CFC still exists today and carries on trail building, landscaping and consulting work and donates profits to CFI. It’s a pretty flexible way to raise funds or employ staff. Here’s the deal on for-profits.
• Well understood business model
• Can make money – no restriction on activities
• Public profile improving with the rise of social enterprises
• Can apply for loans
• Public image may suffer
• Cannot apply for grants
• You have to pay taxes on profits
There it is – the complete CFI journey through the maze of organizational structures. Our organization is very diverse and can fund our activities through a very diverse network of activities but I will say that as the organization grows, so does the administrative work. We have to do accounting twice, tax filings twice, marketing twice, payroll twice etcetera. If you have an idea and you don’t feel like starting you own organization, you can always apply to an umbrella organization like Tides Canada to see if they will allow you to work through their organization to achieve your charitable objectives.
For those of you that hope to start your own organization, I hope this helps. Feel free to contact us at CFI or follow me @pembatrees if you need help. My coworker Mbarouk in Pemba always says that a journey of a thousand miles starts with a single step. Sometimes I feel like I’ve taken a first step a thousand times but such is the journey - always learning and always working for change.