FB5. Can our church carry on a business to generate more resources to carry out our charitable work?
Short AnswerLong Answer
Under some circumstances, the Canada Revenue Agency allows registered charities to carry on a business.More Information, see:
The CRA distinguishes between “related businesses” and “unrelated businesses”.
Its policy is that a “related business” must be related to the objects or purposes of the church as a registered charity and the business must be subordinate to those purposes. A business that is not tied to, or whose mandate does not derive from, the charity’s objects or purposes is not considered a related business even if the surpluses (profits) from that business are turned over to the charity.
A registered charity can also operate a business that is unrelated to the objects or purposes of the charity, but only if substantially all persons involved in the carrying on of that business are not remunerated (paid) for that employment.
“Substantially all” has been considered by the CRA to generally mean 90% or more.
Note: The Income Tax Act says that charities can lose their registration if they carry on an unrelated business. If you are not sure if the business venture your organization would like to undertake would be considered to be a “related business” you can write to CRA to request an opinion.
CRA Policy Commentary - Related Business
Policy Statement - What is a related business?
Charities in Business - What are the limits?