There are a million different things one can discuss when one is thinking about how the world will change when there is a second Trump presidency. However, in this brief note, I just want to focus on the fact that the US will probably be a less hospitable place for certain non-profit groups to operate. Some groups that would have set up a headquarters in the US may decide not to. Some groups that are currently in the US may decide to either move their headquarters outside of the US or, as a risk mitigation approach, set up another organization outside of the US in addition to the US headquarters.
So, for some groups that are more focused on international work, and most of their operations are not necessarily in the US, it may be desirable to have their headquarters in Canada rather than the US.
For a group outside of Canada thinking of establishing an entity in Canada, the main choice of entities in Canada is a
- a nonprofit corporation that is not a registered charity (sometimes referred to as a Section 149(1)(l) of the Income Tax Act (Canada)); and
- a Canadian registered charity.
For most international groups that are based in Canada and do not predominantly have funds from Canadian donors or foundations, it would typically make sense to set up a nonprofit that’s not a registered charity. It would make a little sense to set up a registered charity, which has far more compliance obligations and limitations.
Some Canadian charity lawyers have questioned why anyone would want to set up a headquarters in Canada, but they often think that those headquarters would be a Canadian registered charity with all the limitations of such a vehicle.
Setting up, for example, a Canadian Canada Not-for-profit Corporations Act (“CNCA”) corporation at the federal level that will be a nonprofit and not a registered charity provides lots of flexibility. In addition to being a resident of Canada, the entity can have some or all of its directors who are nonresidents in Canada. Yes you heard that right, none of the board needs to be resident in Canada. Such Canadian nonprofit corporations can have very broad objects/purposes that are not constrained by charity law.
A Canadian nonprofit can operate almost totally virtually. It does not need to have a large physical office and can have a virtual office and does not even need to have employees in Canada.
Canada has a number of advantages, including:
- stable political and economic environment
- a strong global reputation (which, as an aside, admittedly is not always well deserved!)
- a strategic location in North America
- a banking system that has very good international connections
- multicultural, multilingual and diverse workforce
- a high quality of life
Canada is not a uniform country, and the cost of living in some areas is much higher than others. However, many global organizations that are incorporated in Canada may not even have a single employee who actually lives in Canada! The weather in Canada is pretty cold in winter, but then again, if you are working from Guatemala or Argentina, it does not really matter! Even with a Federal corporation, the regulatory requirements are not uniform across the country, so it makes sense to obtain advice on what makes the most sense for a prospective non-profit operating in Canada.
If you consider setting up a global organization, Canada may make sense as the place of incorporation.
If you wish to retain our law firm to discuss the various approaches and how to implement them, then you can contact us here.