Starting a New Nonprofit Association

Jessica Levine, CPA, CMA Best Practices Leave a Comment

Starting a New Assocaition

 

Starting a New Nonprofit Association: what you need to know and how an association management company can help you get there!

Associations are designed to serve a public purpose, rather than provide profit for any particular individual or corporation. Professional Associations are formed when industry partners come together based on a common interest or goal, whether legislative, educational or social. Ultimately, Associations act as a vehicle for groups of people to make a larger impact in their industry than they could individually.

Internal Structure

The first step towards starting a professional association is establishing the internal organization of the corporation. To do this, there are a few questions you must answer:

1. What is the name and purpose of the association?

  • Start by picking an appropriate name for the association. Then, to define the company’s purpose, create a mission and vision statement.
  • The mission statement should define the major objectives of creating the association and its approach to those objectives.
  • The vision statement should describe the desired future position of the organization.
  • Both statements should be one to two sentences in length and be broad enough to allow for change throughout the year.

2. Who will serve as the first board members?

The first board members should represent different areas of the industry, and ideally include those who are recognized in the industry and have time to give to the new association.

3. Who are the target members?

Determine the type of people or companies that could potentially be members in your association and collect their contact information. Determine what other associations in the industry exist and investigate what member benefits they offer, the cost of their membership, and where possible, their member satisfaction levels. Use this information to decide what value-add you could provide to the industry with your new association.

4. What are the benefits and services of the association?

Certain benefits or services should be included in member dues.  These can include access to publications, webinars, seminars, discounted event registration fees, etc.

Many of these items can be hard to obtain when you’re just starting out. So, a good practice early on is to promote the community you are creating and how it will stand out from existing ones. Try hosting small networking events to demonstrate why your new nonprofit is special. Word of mouth is essential for smaller associations.

5. What are the income and expenses of the association?

There are a variety of ways nonprofits can sustain their activities financially:

  • For membership dues, decide if there will be one cost for all members or options based on industry roles, business size, individual vs corporation, etc.
  • Non-dues income can include sponsorships, grants, event registration, donations, investment income, and other potential sources of revenue.
  • Once income and expenses are determined, it is crucial to create an annual budget based on projections. In this way, the board and members know how much money is allotted for each activity of the association and can track any variances throughout the year.

6. What are the Bylaws of the Association?

Bylaws define the structure of the association and serve as a guideline for processes and procedures. They should reflect the image of the association and confirm, in writing, the purpose, guiding principles and other fundamental facts of the association.

Bylaw topics typically include membership categories and qualifications, membership benefits, board members, roles, qualification and terms of office and election procedures.

At first glance, answering all these questions may seem like a daunting task. An association management company (AMC) can help you with all of the above. As professionals with experience in a variety of industries, AMC’s can offer insight into important best practices. This includes advising on board structure, recommending election procedures and terms, marketing approaches for targeting new members, and other key strategies.

The process of developing and drafting bylaws can also be simplified by working with an AMC. They can help the new association consider typical bylaws documents from existing Not-For-Profit corporations, as well as help create by-laws that include provisions to meet the specific needs of your organization with the help of specialized lawyers.

Setting up a Not-For-Profit Corporation

Once the fundamentals have been established, an application for a Certificate of Incorporation should be prepared in accordance with the Not-for-profit Corporations Act. This application must include Articles of Incorporation, Initial Registered Office Address and First Board of Directors form, a NUANS name search report, and a filing fee.

Upon incorporation, the organization will receive a Business Number (BN). This is a unique federal government number that identifies your organization and the account maintained with Canada Revenue Agency. It is important to note that incorporation of a professional association does not provide that corporation with the authority to practice or regulate the practice of the profession.

An association management company can take the stress out of this process. As professionals, AMC’s have experience creating articles of incorporation and navigating CRA regulations and requirements.

Next Steps 

1. First Directors Meeting
In order to authorize organizing actions of the corporation, first directors must either hold a meeting or sign off on a document containing organizing resolutions related to:

  • By-laws
  • Corporate records
  • Appointing officer
  • Making bank arrangements
  • Transacting any other business

2. First Members’ Meeting or Signing of Resolutions
Similar to the Directors Meeting, a first meeting of members or a members’ adoption of initial organizing resolutions in writing is required. AMC’s can provide guidance on conducting Directors and Members Meetings and support the preparation for and co-ordination of these meetings. Additionally, they can help draft written resolutions for review and authorization.

3. Make Bank Arrangements
Once incorporated, the association will need to choose a financial institution to meet its corporate banking needs. At the first meeting, directors should include this banking decision in their resolutions.  It is also important to designate signing officers and determine processes for conducting banking business. An AMC can play a critical role here by using their current bank relationships to obtain preferred rates on corporate accounts.

4. Set up and Maintain Membership and Accounting Software
As part of the start-up process, it is recommended that an association invest in both membership management software as well as accounting software. Membership management software is essential for tracking and communicating with members.  It helps expedite the process of sending membership renewals, updating member contact information, providing information blasts and other membership-related interactions.

Accounting software is similarly vital.  It provides the basis for recording the association’s financial transactions and producing its financial and management reports. It eases the process of recording and tracking accounts payable and accounts receivable, performing banking reconciliation and other matters key to an association’s financial health.

An AMC is critical to help manage membership and pertinent financial information. Internal controls should be implemented to support accurate record keeping, promote operational efficiency and ensure compliance with NFP rules and regulations.

5. Annual Filing
All resident corporations (except tax-exempt Crown corporations, Hutterite colonies and registered charities) must file a corporation income tax (T2) return every tax year even if there is no tax payable. This includes non-profit organizations.

As well, a federal not-for-profit corporation, must file a Non-Profit Organization (NPO) Information return. This return provides up-to-date information about the NPO and must be filed no later than six months after the end of the fiscal period. An AMC can support the association in these annual filings.

Overall, an AMC like Redstone Agency can help guide you through every step of starting your association. Combining our expertise with that of other professionals, we can ensure your new association gets to serving your community as quickly as possible

If you would like assistance with forming an association or have any questions on the above steps, you can reach out to [email protected] for more information.

 

Resources:

  1. Creating a not-for-profit corporation – https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04970.html#toc-05
  2. Next steps following incorporation – https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04993.html
  3. Canada Not-for-profit Corporations Act – https://laws.justice.gc.ca/eng/acts/c-7.75/
  4. Income Tax Guide to the Non-Profit Organization (NPO) Information Return – https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4117/income-tax-guide-non-profit-organization-information-return.html#C1_NPO_return
  5. Who has to file a corporation income tax return (T2) – https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/who-file-a-corporation-income-tax-return.html
  6. Income Tax Act – https://laws-lois.justice.gc.ca/eng/acts/i-3.3/
  7. Reporting Obligations under the Canada Not-for-profit Corporations Act – https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04956.html
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Jessica Levine, CPA, CMA

Jessica is the Manager of Accounting and Financial Services at Redstone Agency. She has experience in a variety of industries and has worked both in the startup world and with a Big 4 firm. She brings with her a wealth of knowledge on accounting and financial management best practices, as well as processes and procedures for ensuring clients’ financial health.

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