Three legal shapes, three different schools
The same classrooms can sit inside three very different entities, and every later question about tax, HST recovery, receipting and exit is answered by which one you chose:
| Question | Share corporation | Non-profit corporation | Registered charity |
|---|---|---|---|
| Who owns it | The founder holds shares | No one; members and a board govern it | No one; a board, under CRA oversight |
| Income tax | About 12.2% on the first $500,000 | Exempt under 149(1)(l) | Exempt |
| HST on costs | Unrecoverable; no ITCs on exempt tuition | School-authority rebate can apply | Public service bodies' rebate applies |
| Donation receipts | No | No | Yes, for qualifying gifts |
| Founder value at the end | Dividends along the way, a sale or succession | None; surplus is locked in | None; assets stay charitable |
The middle column hides the underrated fact. An Ontario school operated on a not-for-profit basis, providing instruction that meets the province's standards, can qualify as a school authority. The public service bodies' rebate then returns 68% of the federal part and 93% of the Ontario part of the HST it pays, claimed on Form GST66. A for-profit school pays the same 13% on rent, renovations and supplies and recovers none of it. On one renovation, that difference alone can decide the structure conversation.
Choose by what the founder actually wants
If the school is meant to be family wealth, with income along the way and a sale or succession at the end, only a share corporation delivers it, and the unrecoverable HST is the price of ownership. If the model runs on donors, grants and the rebate, the non-profit or charity route fits, and the price is governance: an Ontario non-share corporation under the ONCA needs a minimum of three directors, and its surplus can never come back to the founder. There is no clever middle that keeps both.
There is, however, a common hybrid worth doing properly: the school operates as a non-profit while the founder owns the building personally or through a holding company and leases it to the school. It can work, but the rent must hold up as market, because rent flowing out of a tax-exempt entity to its founder is precisely the pattern reviewers look for, and the lease should be papered like the arm's-length deal it claims to be. Walla's corporate-finance background is built for exactly this kind of structuring call.
Whatever you choose, choose slowly. A non-profit's assets cannot be distributed to its founders, ever, and converting a for-profit school into one means permanently giving away the value you built. Charity registration, usually under the advancement of education, is a separate CRA application with a runway measured in months, so if receipting matters to your model, it starts well before the school does.
The Ontario paperwork around opening
Ontario neither licenses nor funds private schools; it requires a Notice of Intention to Operate a Private School filed with the Ministry of Education and renewed each year, and a ministry inspection only where a secondary school wants authority to grant OSSD credits. Approval is not the hurdle; building the entity correctly before the notice goes in is.
The practical stack follows: articles matched to the shape you chose, a business number, an RP payroll account opened before the first teacher is paid, and Employer Health Tax registration once payroll will pass the $1 million exemption. Because tuition is exempt there is usually no HST account at all, unless taxable sidelines like uniform sales cross the $30,000 small-supplier threshold. Each registration is small; missing one until a deadline finds it is not. We open them in sequence, so the first payroll run and the first remittance date arrive with every account already live.
Done in the right order
Through Incorporation we set up the entity to match the decision, not the other way around: share structure with room for a future holding company where the school is family wealth, non-share articles and bylaws a board can actually govern with where it is not, minute book, business number and the accounts above, quoted in writing after a free 15-minute discovery call. And if the school already exists in the wrong shape, Corporate Restructuring can sometimes fix what a rushed incorporation created; earlier is cheaper, and before the building is bought is cheapest of all.
Source: Ontario — Private schools.
