5 Steps to Starting a New Ministry or Church

Building a new ministry or church and seeing it bless your community can be tremendously rewarding. Perhaps you represent an existing organization that would like to start a new venture, or maybe you’re an individual thinking of launching a ministry or church from scratch. Either way, the process of getting started can be complex. Follow these guidelines to help things go more smoothly.

1. Cover the Basics

Every ministry starts with an idea and a group of individuals who commit to carrying it forward. The first step is to refine the concept for your venture. Then, make a plan and create your organization’s founding documents.

Here are some considerations to keep in mind as you and your staff prepare to serve the community. 

Hone your idea. The U.S. Small Business Administration recommends identifying who your organization aims to help, creating a schedule of reasonable goals, and making sure you have the resources necessary to succeed.

Get organized. Decide on a legal structure for your organization. Consider that for financial and tax reasons, you may soon need to apply for 501(c)(3) status). To be eligible for this status, your ministry must be a trust, corporation, or association. For more information on how to gain 501(c)(3) status, see the “Establish Your Ministry” section of this article.

Consider all the costs of starting your organization, and make sure you have sufficient funding. As a cushion against financial difficulties, set aside enough money for at least three months of operations. Here are a few expenses to consider before launching your ministry:

  • Application and consultant fees 
  • Purchase or rental of a facility
  • Furniture, equipment, and supplies
  • Utilities and maintenance
  • Payroll and insurance

Create your ministry’s founding documents. Write a mission statement and bylaws to communicate your ministry’s purpose and structure.

A mission statement should communicate your organization’s core principles. Include charitable and biblical references in the statement, as this will aid with your 501(c)(3) application later.

Bylaws serve as a framework for defining your ministry’s structure and decision-making processes. You could be held legally responsible for failing to follow your bylaws, so define procedures clearly and follow them consistently. Have all foundational documents reviewed and approved by a locally licensed attorney before putting them into effect.

Gather a board of directors. As you recruit a board of directors, remember that your organization can benefit from the leadership of experts in fields related to board activities. Seek the support of individuals who believe in your ministry and who have professional backgrounds related to finance, law, construction, and business. At its first meeting, your board of directors should approve bylaws, a budget, and a timeline for achieving measurable goals. Founding documents and minutes from this meeting should be kept indefinitely for your reference—and in case they are ever needed in court.

2. Establish Your Ministry

Once you and your board of directors have a plan, it is time to formally establish your ministry in the eyes of your state. This can seem intimidating at first, but you can help smooth the process by submitting information that is complete and accurate. Here are a few guidelines:

Register and incorporate your ministry. Many ministries choose to structure themselves as corporations. Structuring your ministry as a corporation can:

To start the incorporation process, you'll need to:

  • Submit your organization’s legal name and articles of incorporation to your Secretary of State. Your ministry’s name identifies your ministry and what it stands for.
  • Use a nonprofit search engine to make sure your name isn’t already taken. Or, your Secretary of State can perform the search for a small fee.
  • Look up your state’s requirements for what your articles of incorporation document must contain. When finished, submit the document to your Secretary of State along with necessary fees.

To formally request corporate status, a ministry generally submits its Articles of Incorporation documents to its state's Secretary of State.

Apply for an Employer Identification Number (EIN). After your Secretary of State accepts your articles of incorporation, the next step is to apply for an Employer Identification Number (EIN) from the IRS. An EIN allows your ministry to open a post office box and file tax forms. You can apply for an EIN online, by fax, by mail, or by phone.

Investigate tax-exempt status. Complete one of the three instructions below based on which scenario best describes your ministry:

  • If you are starting a church, the IRS and your state government may already recognize your institution as tax-exempt, although paperwork filing may be required in some cases. Check with a locally licensed attorney to find out the requirements that apply. If your attorney confirms that the IRS and your state recognize your church as tax-exempt, skip to the “Grow Your Team” section.
  • If your venture is part of an existing ministry, you may already have 501(c)(3) status. Ask your attorney to make sure that’s the case. If so, skip to the “Grow Your Team” section. If not, follow the instructions in the “File for tax-exempt status” section, below.
  • If you’re starting a new ministry other than a church, you’ll need to submit an application for tax-exempt status. Follow the guidelines below.

File for tax-exempt status. Your application for 501(c)(3) status should include about a dozen parts, including IRS Form 1023, your certificate of formation, your bylaws, your EIN, all necessary fees, a proposed budget for the next two years, and a summary of how your ministry benefits the community.

Receiving 501(c)(3) status will make your organization’s ministry-related income exempt from federal taxes. Donations to 501(c)(3) organizations are tax-deductible. This status may also allow you to save money on reduced state, local, and employment taxes, as well as reduced postal rates.

Your ministry will have the option to open a bank account once it receives an EIN. However, it may be best to wait until you receive 501(c)(3) status, because tax-exempt bank accounts have reduced fees and other benefits. If your organization already has a bank account, ask your bank to change it to a tax-exempt account when you receive 501(c)(3) status.

After your organization receives exemption from federal taxes, work with a locally licensed attorney to apply for exemption from state taxes.

3. Grow Your Team

Adding employees and volunteers can increase your ministry’s ability to bring about positive change in the community. Complete necessary paperwork, follow the law, and create a dependable payroll process to establish a foundation of trust with your new hires.

Preparing to add your first employee. In addition to obtaining an EIN, your ministry needs to take a few more steps to be ready for your first employee:

  • Ask your accountant if you need to register with state and local tax agencies. Payroll processing companies like Brotherhood Mutual’s MinistryWorks® may be able to help you with this task.
  • Set up a ledger or electronic spreadsheet to help keep track of your ministry’s payroll and taxes.
  • Visit the U.S. Small Business Administration’s workplace posters page to find out if your organization is required to hang up posters that inform employees about labor laws.
  • Set up pay periods based on the laws in your state.
  • Create an employee handbook that includes workplace policies and expectations for ministry workers. A locally licensed attorney should review and approve this handbook.
  • Shop for a workers’ compensation insurance policy. You may be legally required to have a policy in place before you start hiring.

Stay compliant after hiring. It’s critical to follow employment laws and tax codes. Failing to do so can lead to steep fines and penalties. Here are a few key guidelines to help you stay compliant:

  • Ask each of your new hires to complete a Form I-9 within three days of starting work. The government uses this document to verify an employee's eligibility to work in the United States. 
  • Have each of your employees fill out a Form W-4, which will help your organization withhold the correct amount of federal income tax from each employee’s pay. 
  • At the end of each year, complete a Form W-2 for each employee. This document tells the government about the employee’s wage, salary, and tax information from the past year. Submit a copy of each employee’s W-2 to the IRS—and the employee—by January 31 of each year.
  • Retain copies of the three documents listed above for all active employees, and keep each individual’s records on file in a secure location until three years after they stop working for your organization. Also, save a record of your ministry’s tax deposits by date.
  • Report all newly hired or re-hired employees to your state directory within 20 days of hire. State governments collect this information to help them make legislative decisions.
  • Ask your accountant whether you need to prepare Form 941, which is submitted on a quarterly basis to inform the IRS about employees’ wages and taxes withheld.

For additional help with payroll processing and payroll taxes, browse our MinistryWorks resources.

Manage independent contractors. Your ministry may employ independent contractors, such as traveling evangelists. The legal difference between contractors and employees is sometimes unclear. Consult your attorney for clarification. Ask an accounting consultant how to correctly withhold taxes for contractors. Refer to our Employee and Volunteer Management resources for more information.

4. Manage Risks

As you open your ministry’s doors and invite the community to enter your building, there’s an increased risk of injury, property damage, and legal action. These risks can weigh heavily on the minds of ministry staff and administrators, but proactive risk management frees your team to focus more fully on outreach.

Look into insurance options. Consider purchasing the following types of insurance for your ministry:

  • Property and liability coverage
  • Commercial auto coverage for ministry-owned vehicles
  • Workers’ compensation and employer’s liability coverage
  • Umbrella/excess liability coverage (extra protection based on your organization’s needs)
  • Medical payments coverage (coverage for medical injuries sustained by non-employees)

Find the right agent and policy. Your insurance agent can be an important partner in helping your ministry manage risk. Your agent should help your organization find the minimum coverages it needs to obey the law and should recommend additional coverages to fit your ministry’s needs. A good insurance agent also can help minimize risks by inspecting your facility for safety hazards and by providing education and resource materials.

Start by searching for an agent who specializes in insuring ministries. This may exclude agents in your immediate area, but it’s important to select an agent who understands the specific concerns and insurance needs of ministries. Many traditional agents offer standard policies that do not cover baptistery overflows, unlimited glass breakage, or the risks involved with pastoral counseling.

Look for an agent who is “independent,” not “captive.” A captive agent is an employee of a single insurance company. Independent agents sell insurance products from multiple companies, giving them the flexibility to pick the products that fit your organization best.

When considering an agent, ask for a list of the agent’s ministry customers who can serve as references. These references provide firsthand knowledge of the agent’s customer service and level of experience.

Also, do research when considering a new insurance carrier. Speak to ministry colleagues in your area who have policies with the carrier, and consult consumer ratings from a reputable service like A.M. Best.

Evaluate risks. When working with your insurance agent to decide how much coverage your ministry needs, consider the following questions:

  • What kinds of losses are most likely? Inspect your grounds, equipment, vehicles, and program schedule. Predict what kinds of losses your organization is most likely to experience. 
  • What are your ministry’s assets? Your agent can help you with this. 
  • How comfortable is your organization with assuming risk? Some ministries are comfortable with a high degree of risk, while others prefer a more conservative insurance strategy.

5. Adopt Best Practices

Your ministry started as an idea, and after plenty of hard work, you now have the framework for a successful venture. Here are some final considerations to keep in mind as you and your staff prepare to serve the community:

Foster transparency. Build a reputation of integrity by encouraging transparency throughout your organization, starting with your board of directors. Review financial decisions at each board meeting, and encourage members to ask questions. A board member using ministry funds to employ his own contracting firm is not the kind of story that will help your ministry establish an honorable reputation.

Keep bylaws up to date. Make sure your staff and board of directors are familiar with your ministry’s bylaws. Does everyone in your organization understand who has the authority to make hiring and firing decisions? Is it clear how financial decisions are made?

As your organization begins operation, you may need to change certain operating procedures. Update your bylaws to reflect these changes, so that everyone involved with your ministry understands how it operates. Make sure all bylaw changes are reviewed and approved by a locally licensed attorney.

Understand the FLSA. The Fair Labor Standards Act (FLSA), a law that was created primarily for businesses, also applies to many ministries. The FLSA governs minimum wage, overtime pay, the employment of minors, and other issues. Browse our resources to learn how the FLSA may affect your ministry.

Report income from non-ministry activities. As your organization grows, you may add sources of income from non-ministry activities, such as a coffee shop or bookstore. Ask your attorney whether income from these activities is subject to Unrelated Business Income Tax (UBIT).

Protect children and youth. When working with an all-new staff, background screening and vigilant management are important safety measures. Encourage your staff to report any incident that seems strange or suspicious. Teach your staff about reporting laws related to child abuse and other crimes, as well as your organization’s internal procedure for reporting incidents.

Adapt to changing risks. When starting out, some ministries try to save money by selecting minimal insurance policies. But as your ministry expands, you could be at risk for your buildings, property, and people to be underinsured. Stay in contact with your insurance agent. Add and update coverages as needed to keep your organization protected. Need an agent? We'll help you find one here.

 

Updated August 2019

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2024 Brotherhood Mutual

2024 Brotherhood Mutual