Why and How to Incorporate Your Church
When an organization becomes incorporated, that means it legally holds the same rights and responsibilities as an individual. There are many reasons why churches and other ministries should consider incorporation. The most important is to protect individual members from personal liability associated with the negligent actions of fellow members.
Other benefits of incorporation include:
- Clarification of the ministry’s purpose, procedures, and vision.
- Eligibility to apply for and receive grants through federal or faith-based organizations and foundations.
- Eligibility to receive special mailing rates and other discounts from vendors.
What are the risks churches face by not incorporating?
According to Richard R. Hammar, author of Church Law & Tax Report, “Members of an unincorporated association are individually liable for [wrongful] acts of agents or employees of the association if the [act] is committed within the scope of their authority.”
This means all members of an unincorporated church can legally be found responsible for the negligent or criminal acts of one of their fellow members.
How do ministries incorporate?
Incorporation is enacted at the state level. In most states, the Secretary of State’s office handles incorporation procedures. Many states post incorporation paperwork on their official Web sites, which makes incorporation filings more convenient.
The first step to take when incorporating a church is to contact an attorney who is familiar with not-for-profit laws in your state. The attorney will prepare a document known as Articles of Incorporation. Several standard points are included in this document, such as the church’s corporate name. In most states, the Secretary of State’s office will do a corporate name search for a small fee, to make sure the name does not already exist.
Once the basics are established, the ministry will want to work with its attorney to develop a statement of organizational purpose. Nonprofit organizations (like churches) must clarify that their purposes are strictly charitable and, in the case of a church or other ministry, religious in nature.
After the statement of purpose is established, the procedure of organizational operation must be defined. This is done through a separate document, most commonly referred to as bylaws. For more information about bylaws, see this article on bylaws.
What do ministries that are already incorporated need to know?
If your church or ministry is already incorporated, many states require annual paperwork to maintain your corporate status. This includes submitting a simple annual report to the Secretary of State’s office. Even if you think your church is already incorporated, it’s worth a call to your Secretary of State’s office to make sure there is record of your ministry’s incorporation and its status.
Where can ministries turn for more information about incorporation?
- How to Form a Nonprofit Corporation in All 50 States, by Anthony Mancuso, Nolo Press (www.nolo.com), $39.95
- Ministry and the American Legal System: A Guide for Clergy, Lay Workers, and Congregations, by Richard Couser, Fortress Press (www.amazon.com), $29
- Church Law & Tax Report, by Richard Hammar