Q. What steps should my church consider taking if it decides to end its affiliation with its denomination?

A.  Before a local church disaffiliates from a denomination, it should develop both an exit plan from the denomination and a start-up strategy for a newly independent or affiliated church.

Several Christian denominations have recently seen member churches split over theological differences. As a result, some local churches have evaluated whether to make the difficult choice of leaving their denominations.

The choice to disaffiliate has lasting implications and should not be pursued without prayer, consensus, and legal consultation. While the required steps will differ according to denomination and local law, these general steps can help churches determine how to protect their interests if they choose to go through the process.

Step #1: Identify the Denomination’s Rules for Leaving

Most hierarchical denominations have a rulebook for churches attempting to leave their organization. A denomination’s core documents, such as a book of discipline or church order, often specify the required steps for disaffiliation.

Amid formal denominational splits, some denominations have passed additional rules that provide churches with explicit permission to leave by a specific deadline, but only if they complete a specified process. Other denominations do not explicitly provide an exit pathway, leaving member churches to negotiate directly with the denomination or seek the assistance of the courts in navigating their exit.

Step #2: Analyze the Church’s Property Documents

Before attempting to disaffiliate, a church should know whether it owns its property or whether its denomination could claim ownership. Churches will want to look out for a “trust clause” in their property deeds or in their denomination’s core documents. A typical trust clause states that a local church owns its property in trust for the benefit of the broader denomination. If the local church breaks specific rules or obligations, ownership of the property transfers to the denominational body. This clause can be activated by a church’s disaffiliation from the denomination. It’s a good idea to consult with a local attorney who’s knowledgeable in real estate documents to help the church assess this important point.

From the Safety Library: What Should My Church Know About Trust Clauses? Read more about trust clauses, how they may affect your church, and how to navigate them.

Step #3: File Governing Documents & Arrange Insurance

Determining an exit plan is critical, but making plans for what will happen next is equally important. As noted above, some churches may be subject to denominational trust clauses and need to transfer property ownership. Church leaders should also begin working on governing documents for a new church entity (or updating the church’s existing documents to account for its separation from the denomination).

If a denomination owns the names of its affiliated churches, the leaders of disaffiliating congregations may need to establish new legal entities with new names. Forming a new legal entity requires disaffiliating churches to create and file new articles of incorporation with their state, draft and approve bylaws, and formulate statements of faith. Securing tax identification and tax-exempt clearance is also needed, as is ensuring proper accounting procedures.

Visit the Safety Library to read 5 Steps to Starting a New Ministry.
This article can give your church an overview of where to start, what documents to file, and how to comply with IRS tax rules.

In most instances, a disaffiliating church creating a new legal entity will also need to dissolve its former corporate entity. Prior to doing so, great efforts should be made to ensure the proper steps are followed with the denomination, a new legal entity is appropriately formed, and property interests are fully transferred to the new entity. In a minority of instances, a disaffiliating church may be required to formally cede or transfer its right to certain property as a condition of departure from the denomination.

On the other hand, it may not be necessary to form a new legal entity, particularly if a local congregation is transitioning to another denomination and is not subject to a trust clause. A local attorney can help your church determine whether creating a new legal entity is necessary and, if so, help your church file the appropriate documents with governmental agencies.

Churches should also contact their local insurance agent to discuss insurance coverage for their separating church. As soon as the disaffiliation process is complete and the church’s assets are transferred to the new entity, local congregations will need to have new insurance policies prepared and ready to be issued.

Step #4: Employ the Church’s Pastors and Leaders

Several denominations directly employ a local congregation’s pastors and staff. In these situations, the local congregation will need to take specific steps to employ the individuals on behalf of the church. It’s best for a congregation to set up direct employment contracts with its pastors and staff before separating from the denomination. Local counsel can help craft these employment agreements and ensure they adhere to state employment laws.

Step #5: Negotiate or Prepare to Litigate

After completing the previous steps, your church is likely ready to negotiate separation from its denomination. This can be a tricky process. Some denominations may permit disaffiliating churches to part ways with very little pushback.  Other denominations facing significant financial losses may attempt to recoup lost assets or garner a financial buyout. Other denominations may allow churches to leave the denomination, but only after specific processes have been followed and property ownership is negotiated. Still other denominations may attempt to block a local congregation from leaving altogether.

In each of these instances, local churches will need the assistance of an experienced local attorney to help church leaders navigate the process.  This legal counsel should ideally be well-versed in church disaffiliation. A good attorney can advise a congregation about its options, assist in negotiating departure from a denomination, and help evaluate whether litigating separation in the courts is necessary.

Have additional questions about denominational disaffiliation?
Please contact our Legal Assist service, which provides ministries with free risk management guidance on these and other issues. Our Legal Assist team also can refer ministries to local attorneys knowledgeable in the disaffiliation process.

Additional Resources

 

Posted February 2023

*Important information: Brotherhood Mutual is pleased to provide Legal Assist as a complimentary resource. The services we offer through Legal Assist are intended to provide general legal information to our current and prospective policyholders.

The information we provide is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. Accordingly, no attorney/client relationship is created through this process, and no legal advice will be provided. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.

2024 Brotherhood Mutual

2024 Brotherhood Mutual