Our last post discussed some of the basic reasons for forming a church corporation or ministry corporation. Today, let’s consider:
What type of corporation should be used for a church or ministry?
Churches and ministries are formed as non-profit corporations. Unlike for-profit corporations, non-profit corporations have no owners / shareholders and do not issues shares. They are not “C Corporations” or “Subchapter S Corporations”, although the “C Corporation” designation is sometimes used to describe them.
How are religious corporations formed?
Religious corporations are formed by filing articles of incorporation with the Secretary of State or similar legal body of the state in which the church or ministry is headquartered. The Articles of Incorporation must contain a number of specific clauses, worded to meet the special legal requirements of a non-profit entity. For example, a church or ministry must specify in its articles of incorporation that it is “organized exclusively for religious purposes”. This essentially means that the entity is not formed for the purpose of generating profit or benefiting any particular person involved in its establishment or management. Articles should also list the corporation’s contact address, the name and address of its registered agent, and certain clauses required by the IRS concerning political activity, “private inurement”, and the distribution of assets of the corporation when it dissolved.
The articles of incorporation should not be confused with “bylaws”. Bylaws (which are typically not filed with the state) set out the rules and procedures for how the corporation is governed. They are much more detailed than articles of incorporation.