---
title: "7.5 – Should I Start a Not-for-Profit Childcare Centre?"
description: "**By Jane Fung, P. Eng - Visit [QuietDeal™](https://quietdealnetwork.com/) when you are ready to buy or sell daycare and private schools.** When opening a childcare centre in Ontario, one of your first major decisions is choosing between a **for-profit** or a…"
url: "https://operatorjourney.ca/docs/should-i-start-a-not-for-profit-childcare-centre/"
updated: "2026-10-10"
category: "Childcare Centre / Module 7 - Funding and Partnership"
---

# 7.5 – Should I Start a Not-for-Profit Childcare Centre?

**By Jane Fung, P. Eng - Visit [QuietDeal™](https://quietdealnetwork.com/) when you are ready to buy or sell daycare and private schools.**

When opening a childcare centre in Ontario, one of your first major decisions is choosing between a **for-profit** or a **not-for-profit (NFP)** business model. The differences are significant, affecting everything from your daily operations to your long-term exit strategy.

### **1. Governance and Structure**

A not-for-profit organization does not have owners or shareholders. Instead, it is governed by **members** who elect a **Board of Directors**.

- **Minimum Requirements:** You must have at least three directors to incorporate a non-profit.
- **CWELCC Requirements:** In many Ontario regions, if you wish to qualify for the Canada-Wide Early Learning and Child Care (CWELCC) program, you may be required to have at least **five directors**.
- **Arm’s Length vs. Non-Arm’s Length:** Depending on the CWELCC region, a certain percentage of the directors must usually be at **arm’s length** which means they are not related to you by blood, marriage, or close personal business ties.

### **2. Financial Implications**

The primary distinction lies in how money is handled at the end of the year:

- **No Dividends:** You cannot take profits out of the organization to pay yourself or your members. There are no "dividends" in a non-profit.
- **Tax-Exempt Status:** Generally, not-for-profit organizations do not pay corporate income tax.
- **Reinvestment:** Every dollar of surplus must be reinvested back into the organization, whether through improving the facility, buying new equipment, or increasing staff wages.
- **Ownership:** Technically, **no one owns a non-profit.** You are a steward of the organization, not the proprietor.

### **3. Funding and CWELCC**

If you are enrolled in the CWELCC program, the funding math changes slightly between the two models:

- **Allocation:** Both models typically receive similar funding for operations.
- **Surplus-in-Lieu:** For a non-profit, the "surplus" that would typically be profit is instead spread across various "spending buckets." This ensures that the budget remains balanced while providing better resources for the centre.
- **Approval Odds:** Currently, the Ontario government and local municipalities often prioritize not-for-profit applications for CWELCC expansion as many regions have a mandate to provide 80% funding to not-for-profit organizations while 20% funding going to the for-profit organizations. While being a non-profit offers a slightly better chance of approval, it is not a guarantee. Regions also heavily weigh criteria like "Special Needs" support, "Francophone" services and others. 

### **4. The Risks: Control and Exit Strategy**

Before choosing the not-for-profit route, you must consider the long-term personal risks:

- **Zero Resale Value:** Because there are no shares, you cannot sell a not-for-profit. If you run a for-profit daycare for 20 years, you can sell the business as a retirement asset. With a non-profit, there is no "payout" at the end of the road.
- **Loss of Control:** Since the Board of Directors holds the ultimate power, they can technically **vote you out**. Even if you started the organization, the board could decide you are no longer the right fit for the role and terminate your employment. In a non-profit, the collective board has more legal authority than the founder.

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### **Comparison at a Glance**

| **Feature** | **For-Profit** | **Not-for-Profit** |
| --- | --- | --- |
| **Ownership** | You (the Shareholder) | The Board |
| **Income Tax** | Required | Generally Exempt |
| **Profit** | Distributed as Dividends | Reinvested into the Centre |
| **Exit Strategy** | Can be sold for profit | Cannot be sold |
| **CWELCC Preference** | Lower (Capped in many regions) | Higher priority for expansion |

### **Summary: Is the Not-for-Profit Model Right for You?**

Choosing to start a not-for-profit is a philanthropic move that requires a specific mindset. It may be the right choice if:

1. **You don't intend to "cash out":** You view the daycare as a community service rather than a personal investment.
2. **You want CWELCC priority:** You want to maximize your chances of getting government-subsidized spots.
3. **You have a trusted team:** You have five or more "arm's length" individuals who share your vision and are willing to serve on your board.
4. **You are comfortable with employment:** You are okay with being an employee of the board rather than the "owner" of the business.

If your goal is to build equity and eventually sell a business you fully control, the **for-profit** model remains a better fit.

**Are you looking to buy or sell your daycare or private school? Visit [QuietDeal™](https://quietdealnetwork.com/) to learn more.**