So you want to start a church or ministry? Pastors today face an increasingly litigious and regulated environment that can threaten their church’s success, so it’s vital that you do things the correct way from the start. At the Law Office of Dan Beirute, we incorporate churches and ministries all over the United States so they can avoid unnecessary legal hassles and expenses. Here’s an overview of six requirements to help you establish a church or ministry.
1. Determine Your State
Nonprofit corporations are established under state law. Typically, it is advisable to form the corporation in the state that the corporation will be operating. For churches, that’s usually the state that the church will hold its religious services. For ministries, that’s usually the state where the ministry’s headquarters are located. If the ministry is an overseas ministry, the corporation is usually formed in the state that the missionary considers his or her home base.
There’s no particular value in setting up a church or ministry in Delaware or Nevada if your services or home base aren’t located there. The fact is, if you incorporate in a state other than where the corporation will actually function, the corporation will still need to obtain a certificate of qualification in the state where it operates. Skip the complication, and form in the state where you intend to operate.
2. Select a Name
Usually, state law will not allow two corporations in a state to have the exact same name. Before forming a church or ministry corporation, a search should be conducted to determine if the desired name is available. If it’s already taken in the state, the addition of a distinguishing word to the name can often resolve the problem. For example, it’s common to add the name of a city to the end of a church name in order to pass state muster.
Particularly if the church or ministry expects to solicit or conduct activities outside of its state, it’s a good idea to check the federal trademark database to see if the name has already been trademarked and whether it may be trademarked in the future. At The Law Office of Dan Beirute, we can help you with the trademarking process.
3. Select Directors, Officers, and a Resident Agent
Directors and officers have actual management authority over the affairs of a church or ministry corporation. Officers are the individuals who typically have authority with respect to the day-to-day affairs of the corporation. Usually, they are referred to as the President, Vice-President, Secretary, and Treasurer of the corporation, but other names are sometimes used, such as CEO, COO, CFO, etc.
It’s not uncommon for one person to serve as both Secretary and Treasurer of the corporation. The same person should not serve as both President and Secretary since the Secretary sometimes needs to authenticate the signature of the President on legal documents.
Directors (often referred to as “Trustees”, “Elders”, or “Board members”) usually have general management authority over the corporation. They are usually not involved in day-to-day operations to the same degree as officers of the corporation. Instead, they have the right to vote on “big picture” decisions such as: approving the church’s budget, changing the church’s name, electing officers, amending the articles of incorporation or bylaws, borrowing money, designating compensation for the pastor, dissolving the corporation, etc.
While “directors” and “officers” are not the same thing, a person may serve in both roles. In other words, an officer may be a member of the Board of Directors, but this is not automatically the case. In order to be both an officer and a director, the person would need to be appointed or elected to serve the corporation in both roles.
The resident agent is simply the person who is listed with the state as the person who is allowed to receive official correspondence on behalf of the corporation. The resident’s agent job is simply to turn over official notices from the state or federal government or any lawsuits served on the corporation, to the board or officers of the corporation.
4. File Articles of Incorporation with the State
The corporation is formed on the records of the state when articles of incorporation (sometimes referred to as “Certificate of Incorporation”) are prepared and filed with the applicable state agency, usually the Secretary of State. The requirements for articles vary from state to state, but in general, the articles must contain:
• Name of the corporation
• Identification of the corporation’s purposes
• Corporation’s address
• Name and address of the resident agent
• Name and address of the initial governing board
• Provisions for how the corporation will distribute its assets upon its dissolution
Once the articles are filed with the state, along with the applicable filing fee, and accepted by the state, the corporation is formed.
5. Obtain an Employer Identification Number
Once the corporation is formed (i.e., “incorporated”), an employer identification number should be obtained from the IRS. The employer identification number, commonly referred to as an “EIN”, is the identification number issued to the corporation by the IRS. It is much like a social security number for an individual. The EIN does not confer tax exemption or 501(c)(3) status. It is simply an identifying number, which is used to open a bank account and which is applied to tax filings, including the application for exempt status and payroll filings.
6. Conduct an Initial Board Meeting
Now it is time to start operating! As its first official act, the church or ministry corporation should conduct an initial meeting of its board. At this meeting, the board should elect officers, agree to open a bank account, adopt bylaws, decide whether to apply for 501(c)(3) status and make any other initial determinations necessary to begin its religious activities.
Effectively Manage Your Church
I’d love to help you jump-start your church or ministry corporation. For over 20 years, I’ve been helping thousands of churches and ministries of all sizes with legal counsel. Call or email me today so you can know your legal matters are handled correctly while serving God and people more effectively!