Setting up a foundation is one of the most tax-efficient ways for Canadians to give back. The key is choosing the right structure for your charitable goals and ensuring that you can meet the regulatory requirements.
The process of setting up a foundation in Canada involves the following steps: First, you should determine your philanthropic goals and objectives. Next, you should identify which charitable organizations or causes would most benefit from your donations.
Once you’ve identified the organizations you wish to support, you should start the application process for charitable status with CRA. This may take some time, but it’s essential to get your organization on the right track in order to maximize its philanthropic impact.
You’ll also need to determine whether you want your foundation how to set up a foundation in canada to be a corporation or a trust. If you choose a trust, you’ll need to incorporate the trust with the appropriate provincial government and register it with the CRA.
Using a trust for your foundation provides flexibility that allows you to control the disbursements of your donations and grants. This is especially important if you’d like to ensure that your contributions are being used in the way you intended and in a manner that fits with your charitable purposes.
In addition, a trust structure allows you to make sure that your funds are not exposed to the same risks as if they were invested in a conventional investment portfolio. Moreover, it gives you more control over the investments that are made and how they are managed.
If you decide to set up your foundation as a corporation, you’ll need to consult a lawyer to prepare the articles of incorporation or letters patent and by-laws of your new corporation. The governing documents should include your foundation’s charitable purpose(s), the mission statement of your foundation and the criteria you will use to evaluate grant proposals.
Your foundation’s governing documents will also provide guidelines for your board of trustees or directors to use in selecting the organizations that you wish to support. They should also include a clear, detailed plan of how the funds you’ve contributed will be used.
It is crucial that you keep thorough records of the foundation’s operations. This includes financial statements, fees and expenses, funding and income statements, a granting history and meeting minutes. These documents are a necessary component of your foundation’s compliance with CRA regulations and can help you determine the effectiveness of your grant-making efforts.
You’ll also need to establish a governing board of at least three people who are responsible for overseeing the day-to-day operations and setting grant-making priorities for your foundation. Ideally, you’ll want to include members of your family in these roles as well.
Having your family involved in the foundation’s governing board will be a good way to help them understand the work your foundation does and how they can contribute to its success. Likewise, it’s also a great way to make sure that your foundation’s grant-making activities continue to align with your family’s charitable mission.