Business structures and taxes for Canadian publishers

When establishing your journalism start-up, you may choose to incorporate your business as a for-profit or nonprofit business.

Best practices for for-profit news businesses

Incorporation

Incorporating your news business offers several advantages over a sole proprietorship, which is an unincorporated business owned by one person. They are:

• Owners benefit from limited liability.
• Ownership interests are easier to transfer.
• The life of the corporation can extend beyond that of the founder.
• Credibility is boosted in the eyes of partners.
• Financing and grants are easier to access.
• Tax rates are lower.

Here are more details on those benefits.

Limited liability

The most significant advantage of forming a corporation is the concept of limited personal liability.

A corporation is a distinct legal entity separate from its owners, which means it can own assets, incur debts, and enter contracts in its own name.

Therefore, incorporating safeguards the personal assets of the company’s directors and shareholders from the debts and legal obligations of the company.

Creditors (those owed money by the corporation) can access the company’s assets if it does not meet its financial or legal obligations. They cannot, however, directly pursue shareholders’ personal property or assets to satisfy the company’s debts unless a personal guarantee has been provided.

Easier ownership transfers

A corporation is a separate legal entity, and owners do not own its assets directly. Instead, they own shares in the corporation, which in turn owns the assets. This makes transferring ownership interests easier, which makes it simpler for your company to attract investments from venture capital firms and angel investors because it allows them to get in and out of an investment on pre-agreed terms without much complication.

Unlimited life

Another advantage that incorporated businesses have is that they benefit from an unlimited lifespan. When shareholders die, their shares are passed on to their heirs or are transferred via a sale.

Sole proprietorships, however, automatically dissolve when its principal passes away.

Credibility

Incorporating provides credibility to your business. Potential investors, lenders, readers and employees immediately know you are thinking longer term.

That said, incorporating a business requires additional cost and effort. A corporation needs to maintain a separate set of accounting records from its owners.

Corporations also pay annual registration fees and file separate financial statements and tax returns.

If your goal is to grow your business into a sustainable, long-term operation, incorporating is well worth the effort.

Corporate bylaws

If you are a for-profit corporation, you may also consider creating company bylaws, especially if you are not the sole director, officer and shareholder.

Corporate bylaws are rules a corporation uses to organize its internal management. They outline meeting rules, voting rights, and the policies and responsibilities of the corporation’s directors, officers, and shareholders.

Usually, a corporation’s directors formally create the bylaws at the first Directors’ Organizational Meeting.

Issues that can be addressed in the by-laws include:

• The company management structure. A simple structure consists of a president, treasurer, and secretary. A more complex management structure consists of a CEO, CFO, COO, presidents, and vice-presidents.
• The amount of notice necessary to call a meeting of the directors
• Whether directors and shareholders meetings permit remote communication
• When the bylaws go into effect

After creating the bylaws at the first meeting, the rules and procedures in the corporate bylaws will go into effect and guide the company’s internal management.

Best practices for nonprofit news organizations

A Nonprofit corporation is a legal entity that exists independently from its members and directors.

The primary purpose of a Nonprofit corporation is to operate with the intention of advancing its mission. While Nonprofit corporations can (and should!) earn profits, these funds must be used to further the objectives and purposes of the organization.

Nonprofit corporations are established in accordance with federal or provincial laws governing Nonprofit organizations. These laws provide a framework for the formation, operation, and governance of Nonprofit corporations.

Incorporation

When establishing a Nonprofit journalism start-up, you should consider whether to incorporate the organization federally or provincially. This decision depends on where the organization intends to operate.

Journalism organizations that primarily focus on serving their local community or province usually opt for provincial incorporation.

Federal incorporation is a good option if your organization plans to carry out activities in multiple provinces under the same corporate name. Federal incorporation allows your Nonprofit journalism organization to easily move its registered office across the country without undergoing the incorporation process in each province individually. This option provides flexibility and streamlines administrative procedures when operating in different provinces.

It’s important to note that even if your organization is incorporated federally, you may still be required to register provincially in certain provinces. Some provinces may have specific regulations or reporting obligations that apply to Nonprofit organizations operating within their boundaries.

For more on what to consider when thinking about being a for-profit organization or Nonprofit organization see LION’s article Nonprofit or for-profit — which model is right for your news organization?

Board of directors

When you register your corporation either as a Nonprofit or for-profit, you will have to identify the organization’s initial board of directors for your corporation.

The board is responsible for managing and overseeing the corporation’s activities and affairs and will play a vital role in the governance and supervision of your journalism corporation. Board members will manage its activities and ensure its objectives are met.

Remember that as your corporation grows and evolves, it may become necessary to elect additional directors or replace existing ones with new appointments.

Nonprofit bylaws

The board must begin drafting the bylaws at the first organizational meeting. This process can be simplified by referring to the Model by-laws – Not-for-profit corporations, which apply to a typical not-for-profit corporation.

Corporations Canada has also developed an online interactive tool called a By-law builder: not-for-profit corporations, which allows you to generate the by-laws you want by choosing provisions that meet the specific needs of your corporation.

Issues that can be addressed in the by-laws include:

• The date of a corporation’s financial year-end
• The corporation’s banking arrangements
•  The qualification requirements for board memberships
•  The process for appointing officers, as well as the rules regarding their qualifications and duties
•  The procedures for calling and conducting directors’ and members’ meetings
• The minimum number of directors and members required to establish quorum at meetings
•  The process for amending by-laws
• The rules limiting the modifications that can be made to the directors’ powers under the Not For Profit Act.

Best practices for tax compliance 

If you decide to incorporate your business, you will need a business number from the Canada Revenue Agency (CRA). This is a unique, 9-digit number and the standard way to identify your business.

For more on registering for a business number, visit the CRA website.

Registering for a GST number

As you set up your journalism start-up you might wonder when you need to collect the federal goods and services tax (GST) or, in some provinces, the harmonized sales tax (HST).

If your business earns more than $30,000 in gross income (what you earn before you deduct business expenses) during any 12-month period, you must register for a GST/HST number with the CRA.

Some business income doesn’t count toward GST/HST collection, including salary from a job, grants, and sales outside of Canada.

If you fail to file your GST/HST returns, the CRA won’t send you a reminder or a warning, and you could eventually face substantial fines.

The benefits of a GST number

Having a GST/HST number isn’t just about fulfilling your tax obligations; it also makes your news business eligible for entitlements such as input tax credits (ITCs). Not having a number risks leaving money on the table.

ITCs allow businesses to recover GST/HST paid on purchases of business supplies and contracted services. Everything, from fuel costs and shipping charges to commercial rent and telephone fees, is eligible for GST/HST recovery through ITCs, as long as you used that good, service or property for your business.

What exactly is a GST/HST number?

A GST/HST account number consists of your nine-digit business number followed by “RT 0001”.

You’ll use this number to file GST/HST returns, make remittances to the CRA, and signal to customers and the government that you’re legitimately charging and remitting taxes.

Businesses cannot claim ITCs from other small businesses or suppliers who do not have a GST or HST number.

Carefully recording your business spending—including noting the exact amounts for GST/HST throughout the year makes it easier to complete your tax returns.

How to get a GST/HST account number

The quickest way to apply for a GST/HST account number is through the CRA’s website. You can also call the business inquiries line (1-800-959-5525) or complete and submit a request form by mail or fax to a designated tax center.

Businesses in Quebec must register through Revenu Québec, which administers GST in that province.

Charging and collecting GST/HST

When it comes to operating a digital journalism business, it is important to note that Canadian businesses charge GST on digital goods and services like digital newspaper subscriptions, video downloads and ebooks.

GST remittances for the CRA can be filed quarterly or annually with the help of an accountant.

Do I have to collect provincial sales taxes (PSTs)?

Businesses operating in provinces with only the HST must register with the federal government and collect the harmonized tax.

However, if you sell taxable goods and services in British Columbia, Saskatchewan, Manitoba or Quebec, you may be required to register with the respective provincial government to collect the provincial sales tax.

Check your province’s tax guidelines to determine what goods and services are exempt from PST collection and if your business must charge PST.

Provincial sales taxes are calculated based on the original price of the goods and services without including the GST in the calculation.

None of the Canadian territories have a territorial tax.

Nonprofit classifications in Canada

There are a few classifications of nonprofit journalism organizations in Canada, each of which offer different benefits. They are:

• Nonprofit corporation
• Qualified Canadian Journalism Organization (QCJO)
• Registered Journalism Organization (RJO)
• Qualified donee

Your news start-up must be a non-profit organization to be classified as either a QCJO or an RJO. It must be a QCJO to be classified as an RJO and must be an RJO to be a qualified donee. Read below for more information.

Becoming a Qualified Canadian Journalism Organization (QCJO)

Becoming a Qualified Canadian Journalism Organization (QCJO) can offer your organization several benefits, such as qualifying for the Canadian journalism labour tax credit or allowing your readers access to the digital news subscription tax credit.

To become recognized by the CRA as a QCJO, you must be a Canadian corporation or trust founded and run by mostly Canadians and be based in Canada.

Your journalism start-up must create original journalism, and more than 50% of your content must be focused on general interest news, current events and reporting on democratic institutions.

Trade journals, travel magazines or organizations that produce content focusing primarily on industry-specific information, sports or entertainment news is not considered to be engaged in producing original news content for QCJO purposes.

Your organization must regularly employ two or more journalists who deal at arm’s length with the organization in the production of its content and who are not freelance journalists. The person that owns the corporation does not qualify as dealing at arm’s length and does not count as one of these employees.

For more information about the QCJO designation, visit the CRA website.

Becoming a Registered Journalism Organization (RJO)

If you are a Nonprofit journalism corporation and want to be able to issue tax-deductible receipts to donors, you must apply to become a registered journalism organization (RJO) under the Income Tax Act. This will allow your organization to receive “qualified donee” status, which is akin to being a charitable organization.

To become an RJO, your organization must first be designated as a Qualified Canadian journalism organization (QCJO). 

Criteria for becoming an RJO

Becoming an RJO allows your organization to operate free from certain tax obligations while providing potential donors with the incentive of tax deductions for their contributions.

An organization must meet all the criteria below to be eligible to register as an RJO:

• It must be designated as a QCJO.
• It must be a corporation or a trust.
• It must be constituted and operated for purposes exclusively related to journalism.
• Any business activities it carries on must be related to its purposes.
• All members of its board of directors or trustees must deal with each other at arm’s length.
• It cannot be controlled, directly or indirectly in any manner whatsoever, by one person or a group of persons that do not deal with each other at arm’s length.
• Generally, in any taxation year, it cannot accept gifts from any source representing more than 20% of its total revenue (including donations).
• No part of its income can be payable to, or otherwise available for, the personal benefit of a proprietor, member, shareholder, director, trustee, settlor or similar individual.
• It must be primarily engaged in the production of original news content.

For more information, see: Guidance on the income tax measures to support journalism

Compliance for a qualified donee organization

A qualified donee organization, such as an RJO, is responsible for all receipts issued under its name and registration number. It must account for the corresponding donations on its annual information return and in its books and records.

A qualified donee should never, under any circumstances, issue donation receipts on behalf of another organization or lend its registration number to another organization for receipting purposes. This may result in your receipting privileges being suspended and losing your organization’s registered status.

As an RJO, you must ensure that official donation receipts meet the requirements of Canadian law.

Books and records for RJOs

One of the main obligations of RJOs is to keep reliable, accurate and complete books and records that contain:

• Information that allows the CRA to verify the amounts that donors can claim for tax credits or deductions
• Information that allows the CRA to confirm that the entity meets the requirements for qualified donee status under the Income Tax Act
• A duplicate of each official donation receipt issued, containing prescribed information for the gift received

Books and records must be kept at the Canadian address that the RJO has on file with the CRA and must be provided to the CRA on request.

Books and records include, but are not limited, to:

• Governing documents (corporation, partnership, or trust document)
• Bylaws
• Financial statements
• Copies of annual information returns (Form T1000-1)
• Written agreements
• Contracts
• Board and staff meeting minutes
• Annual reports
• Ledgers
• Bank statements
• Expense accounts
• Inventories
• Investment agreements
• Accountant’s working papers
• Payroll records
• Promotional materials
• Fundraising materials

Books and records also include source documents, such as:

• Invoices
• Vouchers
• Formal contracts
• Work orders
• Delivery slips
• Purchase orders
• Bank deposit slips

RJOs vs. nonprofit organizations 

	Registered Journalism Organization (RJO)	Nonprofit journalism organization
Purposes	Cannot operate for the purpose of profit	Cannot operate for the purpose of profit
Registration	Must apply to the CRA and be approved for registration as a Registered Journalism Organization (RJO)	Is not required to have its status approved by the CRA
Charitable registration organization	Is issued a charitable organization number	Is not issued a charitable organization number
Tax receipts	Can issue official donation receipts for income tax purposes	Cannot issue official donation receipts for income tax purposes
Returns	Must file a Form T1000-1, Registered Journalism Organization Information Return and related documents within six months after its fiscal period ends	Must file a T2 tax return
GST	Must pay GST/HST on purchasesCan claim a partial rebate of GST/HST paid on eligible purchases only if it receives significant government funding	Must pay GST/HST on purchasesCan claim a partial rebate of GST/HST paid on eligible purchases only if it receives significant government funding

Benefits of being a QCJO or RJO

• Your business may qualify for the Canadian journalism labour tax credit, which is a refundable tax credit that is available at a rate of 25% of the total qualifying labour expenditures for a taxation year pertaining to eligible newsroom employees of a qualifying journalism organization.
• Your readers may be able to access the digital news subscription tax credit, which is calculated by multiplying the lowest personal income tax rate (15%) by the total of all amounts paid by an individual to a QCJO(s) in the year for qualifying subscriptions expenses up to $500.
• Organizations designated as QCJOs may request the Canada Revenue Agency (CRA) determine whether the subscriptions they offer are qualifying subscription expenses for their readers.

The Local Journalism Initiative

The Local Journalism Initiative (LJI) supports the creation of original civic journalism that covers the diverse needs of underserved communities across Canada.

Funding is available to eligible Canadian media organizations to hire journalists or pay freelance journalists to produce that journalism.

 To be eligible for funding, an applicant must qualify as one of the following:

•  A press agency
•  A private news organization
•  A nonprofit news organization

 Private, non-community broadcasters and the CBC/Radio-Canada are not eligible.

Organizations must also operate in one of the following fields:

• Written press
• Community radio
• Community television
• Online news services

The applicant organization must also demonstrate that they:

• Are majority owned and controlled by Canadians
• Engage in coverage of democratic bodies/institutions and civic function 
•  Are edited, designed, assembled and published in Canada and directed primarily at Canadian audiences in Canada
•  Have completed at least one uninterrupted 12-month publishing cycle

The intention of the LJI is to ensure the content created under its grants receives the widest possible distribution and is freely shared with other news organizations invested in the creation of Canadian journalism.

Stories, photos and other content produced by LJI reporters are posted on the News Portal, managed by The Canadian Press on behalf of News Media Canada. News organizations can request a user account and password to gain access.

News organizations can use content produced by LJI reporters, regardless of whether they employ an LJI reporter.

Participating news organizations are subject to a Creative Commons license restricting the use of the content to editorial use and must adhere to basic journalistic standards.