Building a ministry 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 from scratch. Either way, the process of getting started can be complex. Follow these guidelines to help things go more smoothly.
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:
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.
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:
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:
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.
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:
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:
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.
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:
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:
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.
Thank you for your interest in Brotherhood Mutual. We appreciate the opportunity to provide your church or other ministry with an insurance quote and will reply to your request as soon as possible.
Text to follow...