There is not a week that goes by that we are not talking to someone in ministry regarding issues that have risen in a church. One of the first things we ask is: What does your Constitution and Bylaws state? In the early days we were always shocked that the person did not know. We are no longer shocked. Both clergy and the people in the pew have no idea what their legal documents state. Often they are surprised to find that even their Statement of Faith is not what the church practices and believes. This ignorance is dangerous ground and the basis for many churches finding themselves in court today.
We constantly hear: What’s the big deal? Why do we have to have all of this? Most of this is redundant. It’s too complicated. Unfortunately, many of those who have stated this no longer have a church because the church no longer exists.
The “big deal” is that as an incorporated business, often as a nonprofit, there are state laws that must be followed. Leaders who declare ignorance on these matters should understand a legal truth: “I didn’t know” is not a defense in the court of law. As a leader it is your job to know. Failure to do so not only can harm the church as a whole but there are individual consequences for the leader(s) as determined by state law. Below are the legal documents required to form and maintain a church.
Each ministry needs to review their documents regularly to ensure they comply with their state’s laws and that the documents they do have are being followed. Include a review to ensure the church is protected regarding hot button Note on a calendar each year those items that must be accomplished to stay in compliance so that nothing is missed. Failure to follow state laws or your own established guidelines can place a ministry in legal jeopardy. This link will take you to a comprehensive list of all Secretary of State offices in the United States where you will be able to locate the exact requirements (including yearly requirements), forms, statutes, and contact information you may need: http://www.e-secretaryofstate.com/
Name Reservation or Search
If you are starting a new work, you will need to do a search in your state to see if the name you wish to use is already taken. The official name may be different than the one used. For example, there are many First Baptist Church’s listed. Their official name, however, may be First Baptist Church of Podunk Holler, First Baptist Church of Big City, or First Baptist Church at the Beach. Officially their names are different. In their local community they may simply be known as First Baptist. There is no perfect name to a church. Consider, however, to choose a name that reflects the vision and the community. Ensure that a name you choose does not exist within a 30 to 50-mile radius. This will help avoid confusion or misunderstanding. Your Secretary of State’s office will be able to assist in this search and name reservation if you so desire.
Articles of Incorporation
This is the first required document for a ministry by the government. Articles of Incorporation may vary from state to state so be sure to locate what is needed for your state. Most churches will need to incorporate as a non-profit corporation; each state has its own definition of what qualifies as a non-profit. The decision of whether to have members or no members varies from state to state; wording is key. Please check with an attorney to determine what is best for your state and situation. Follow your state’s sample form of Articles of Incorporation and have it reviewed by an attorney before submitting.
The Constitution (Statement of Faith and Bylaws)
The Constitution is the foundation by which the church will govern itself. Each state has specific requirements and topics that must be included to satisfy state law. Consult with an attorney to ensure that your documents comply. All corporations (secular and non-profit) may make their own rules and guidelines, however, they are required to follow them. In the event of legal action taken against the organization there will be a discovery process to determine if the organization has followed their own rules and guidelines. Failure to do so consistently can adversely affect the outcome for the organization. A church is unique in that not only does the Constitution lay out how it will conduct itself in organizing but also establishes through the Statement of Faith what it believes. While the Bylaws (organizational guidelines) may be changed, the Statement of Faith should not be changed except to provide additional protection or clarification of doctrine and beliefs. If a church finds the need to amend their Bylaws, they must do so without violating their Statement of Faith and must follow the procedure laid out in their Bylaws. Although the Constitution and Bylaws are not always required to be submitted to the Secretary of State’s office, we do recommend that it is submitted as an additional layer of protection of the document. Anytime the Bylaws section of the document is amended and ratified, the new document should be submitted to supersede the previous. (The Constitution and the items making up the Constitution are explained in detail in The Business of Ministry written by Daniel & Melissa Woltmann.)
Employer Identification Number (EIN)
All organizations, whether they will have employees or not, must file for an Employer Identification Number. This number identifies you to the IRS and to the state. This is NOT the same number as your tax-exempt number. Do not apply for your EIN until your organization is completely formed. Follow this link to learn more about the EIN application process: https://www.irs.gov/charities-non-profits/employer-identification-number
IRS – 501c3 Status
You will need to file for a 501c3 tax exemption if you receive donations (tithes and offerings). You must have a 501c3 status in order for your church to provide tax receipts to those who give to your church. The IRS has many helpful links to assist you in proper filing. As stated on the IRS website: “State law governs nonprofit status, which is determined by an organization’s articles of incorporation or trust documents. Federal law governs tax-exempt status. The Internal Revenue Code specifically refers to exemption from federal income tax.” Follow this link to find all the information you will need to file the appropriate forms to apply for your 501c3 status: https://www.irs.gov/charities-and-nonprofits
Banks require an organization’s Articles of Incorporation and EIN in order to open a bank account. You will need to establish a business bank account in order to do business and to receive donations primarily to ensure financial oversight. Be sure to follow your church’s guidelines on who should be check signers and hold debit and credit cards. This is an area where oversight by multiple people is a must.
As your organization conducts business and grows, it is required by law that minutes of business meetings are kept. These minutes include all deacon and trustee meetings, all church business meetings, and any special meetings called to conduct the business and ministry of the church. Your Minister of Records must ensure that these documents are dutifully filed on the church property and kept in order and up to date. This serves as a protection to the leaders as well as to the members and provides a clear picture of the church’s business and ministry practices and decisions. Without them, decisions made and actions taken could be declared null and void. Failure to hold the required meetings by state law and those designated in the Bylaws of the church could result in the potential loss of the church’s 501c3 status; this is due to statutes in the US Tax Code. These minutes are considered public record. The church may limit viewing to church members (unless during litigation). The process for requesting to see these documents should be described in the Bylaws of the Constitution.
Church membership records are also legal documents. In some states a baptism record may be used as part of proof of identity. It is important that the church explains in detail its membership guidelines and places protections in them for the sake of the church and the individual. Often churches do not “purge the rolls” as indicated in their Bylaws. This negligence could be detrimental. Establish your guidelines for joining, maintaining membership as well as for removal of a member then follow them equally for everyone. Always keep your records current.
The church’s financial records are considered public records as well. The Constitution and Bylaws should outline how the church’s budget is determined. The Bylaws should also reflect who, how, and when these documents may be reviewed. Ensure that your Bylaws protect records of those giving to the church; those items may not be requested. The Bylaws should include guidelines for reporting the budget and financial reporting to the membership. This reporting may be annually, biannually, quarterly or monthly. Whatever is decided by the church and written in the Bylaws must be followed. Your state may indicate how often financial records are reported for nonprofits. Include those requirements as a minimum. Further reporting may be added. Regardless, whatever the Bylaws state for financial reporting must be followed. Failure to do so may violate state laws and possibly the IRS Tax Code.
These are the items necessary to legally begin and then maintain a church. While a church can biblically exist without these items, without them, there is no legal protection for the people of the church. Without them, members and non-members may not use donations, tithes, and offerings as deductions on their taxes. Without them, owning properties, conducting business, and organizing additional ministries may be greatly hindered.
We cannot stress the importance of the maintenance and upkeep of these documents. Seek legal counsel to safeguard that your documents follow your state laws and the US Tax Code. Review them annually. Faithfully follow the guidelines set forth in your documents to ensure the protection of the church.
Understand, we are commanded in Scripture to be subject to the laws of the land provided they do not ask us to violate Scripture. Currently, none of these legal requirements violate any biblical principles. However, failure to follow the laws of the land by a church and its members will not only violate those laws but also Scripture, thus harming the testimony (and possible continuation) of the church in its community.
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*For detailed descriptions and explanations of the items listed as well as other helpful information regarding the business side of ministry, please consider our book The Business of Ministry by Daniel & Melissa Woltmann which can be purchased on Amazon.