How to Incorporate*

In today's society things change so rapidly that most churches are being left in the dust. There are no number of techniques that will help you unless you orchestrate them through the proper channels. It is very important for churches today to incorporate*, as it creates an entity that can acquire property and hold assets in its name. If you want to be believable, create an entity that is believable. The Apostle Paul said it well in 1 Cor. 9:22: "I have become all things to all men that I might by all means save some." Again, you can only be believable if the entity you create is believable.

Rest assured that when you incorporate* your church or ministry, you are not subjecting God's kingdom to the laws of men. You are simply creating an entity that can act in the name of the church. Every state in America has its own set of legislation governing the way corporations are formed. You do not need to go and spend hundreds of dollars letting someone else do it for you when you can do it yourself for pennies on the dollar.

Your basic blueprint for success rests in our 7-step process. Each step is necessary to incorporate*, and once you get through it you will find yourself in a position to succeed. After those 7 steps, there are a number of other resources we provide you to better equip you as a steward over what God has placed in your hands. Helping leaders establish God’s kingdom is our passion. We want to come alongside you and serve you in that process.

As the saying goes, we have been there and have done that. We know where the pitfalls lie and how best to set up a church's corporate presence (Hosea 4:6; Proverbs 11:14). Our years of experience will guide you step-by-step as you incorporate* your church. By the time you are done incorporating, you will have an entity that allows your church to set any and all possible scenarios. There is certain language that your corporate documents need in order to create the flexibility necessary for your church to grow and broaden its outreach. The good news is it can easily be done, and we can do it for you; or with our resources you can do it yourself.

FEIN

You want to make sure that your church's finances are set up correctly. The checking account is where you store most of the general treasury of the church. Many churches have grown to store millions of dollars in their general treasuries. Without any bank accounts you can be assured that your church will have a difficult time getting anything accomplished. Your church's bank account is the backbone of your ministry and the lifeline of everyday operations. In order for you to correctly open up a checking account in the name of your church, a Tax I.D. Number (also known as the F.E.I.N.) is needed. With the Tax I.D. Number your church can begin its daily operations and safely store its money in the church's general treasury. Once the church has bank accounts, it can receive tithes and offerings from people and have a safe and secure place to deposit them. The church will also need a good software program to keep track of all tithes and offerings that have been received in order to issue tax receipts to those that give.

You can get that software right here! Our Kingdom Steward software makes it easy to print out official IRS tax deductible receipts to all those that give. Kingdom Steward can also keep track of birthdays, events, mailing lists and much more.

Constitution and Bylaws

All church leaders want their church government to be one that protects the best interest of the church. Today's liberal courts are slowly re-engineering the American way of thinking. They are paving the way for same sex marriages and other anti-biblical behavior to become mainstream. Churches need to understand that the language in the constitution and bylaws needs to ensure that a biblical model of government will rule. The language needs to protect the pastor or founder from being voted out and from having to adopt anti-biblical polices. All of these issues can be addressed in the constitution and bylaws. There are too many churches today operating with inadequate constitution and bylaws, and that can only mean one thing; they are headed for trouble.

Furthermore, true to Scripture, in every house there are vessels of gold and silver, but also of wood and clay, some for honor and some for dishonor (2 Tim 2:20). This forewarns us that there will be people that will challenge the leadership of the church with bad intentions. Your church needs to ensure that the constitution and bylaws create a foolproof method to ensure the longevity of the church. At StartCHURCH we have already done that for you. We close every possible loop hole and take every possible measure to ensure that the constitution and bylaws agree with the corporate documents, as well as provide policies and procedures for handling delicate situations in a biblical way.

As you establish your church, you must allow God to lead you and help you do it without having to hire outside help. Attorney fees are astronomical, and yet very few ever spend time studying church law. We have seen too many churches operating with standard nonprofit constitution and bylaws which give state laws and courts complete control regarding policy. Interestingly, those same laws allow you to create language in your constitution and bylaws that deal with issues in a biblical way. By using our methods and strategies you will become better equipped to handle anything that comes your way.

Ministry Corporate Seal

All states require every church or ministry that incorporates to conduct an organizational board meeting. This meeting is required because it finalizes the legalization of your organization. At the board meeting you must ratify the following items:

• Appointment of chairperson and secretary.
• Directors elect themselves to serve. Under the laws of most states, when the articles of incorporation are filed, the directors listed are the initial set of directors and they need to be replaced, reinstated or altered at the organizational meeting.
• Appointment of officers.
• The articles of incorporation.
• The constitution and bylaws.
• Resolution to open a checking account.
• Resolution concerning the borrowing of money.
• Reimbursement of reasonable out-of-pocket expenses incurred in establishing the corporation.
• Set the date of the next meeting of the directors.
• Adopt policies such as conflict of interest, reimbursement, salary compensation, etc.

Many churches never conduct this board meeting and are unaware of the dangers the church faces without it. A church may not officially have a board of directors or articles of incorporation of bylaws without a board meeting. Our Ministry Corporate Records Kit will walk you through the entire process of creating your organizational board meeting minutes, including obtaining the corporate seal and other various important polices and procedures.

Serious problems can arise as a result of not conducting an official organizational board meeting. In 2003, a Washington court determined that a pastor and his entire board of directors were not legally elected to their positions because they had not properly followed state nonprofit corporation law. This meant that the board the church thought it had in place was ruled invalid. In turn, the church's bylaws were trumped by state law. Finally, the court ordered a court-supervised election of new board members.

It is imperative that the church, upon incorporating, write bylaws and have them ratified in the organizational board meeting. This topic is so important that at all of our conferences we spend a substantial amount of time teaching how to conduct a board meeting correctly, as well as how to take and format minutes.

How to License Ministers

One of the greatest advantages of establishing a church is your autonomy. When a church is autonomous, it has a greater ability to establish relationships with other churches regardless of their denominational backgrounds. Additionally, it brings to your church the ability to license and ordain ministers in accordance with the convictions of the leadership's heart. When licensing, one must keep in mind that it is God who ordains and man simply recognizes what God has already done.

The courts have ruled that the power to license and ordain ministers does indeed belong to the church. However, the courts have also allowed the IRS to establish criteria to determine whether a minister qualifies for special tax benefits. By law, the IRS cannot judge or question your church or ministry's right to license and ordain, but it can scrutinize it for tax purposes. Confusing? Yes! That is why we have created this newly revised resource that teaches how to properly set up a licensing and ordination program in your ministry that meets all state and federal requirements. This qualifies you and your ministers not only to solemnize marriages, but to also take advantage of special tax benefits extended to ministers by Congress under Subsections 107, 1401 and 1402. There are many potential ministers who are called of God and eager to work in His kingdom, but many are denied a ministerial covering by their denomination because they fail to meet the standards that have been set forth. Though qualified in the Lord’s eyes, a mountain of obstacles can stand in their way to becoming a minister.

The word license, as found in Webster’s dictionary, is defined as "permission granted by competent authority to engage in a business or occupation or in an activity otherwise unlawful." State and federal courts have clearly ruled that the authority to legally license and ordain ministers belongs to the church.

By licensing and ordaining your own ministers you will grant them the authority to perform certain acts that he or she would not otherwise be able to perform e.g., marrying, funerals, pastoral counseling, clergy-penitent rules, special rules for filing taxes, etc. Whenever your church grants a license, the government accepts it as valid and allows the person to exercise the rights and privileges that come with being a licensed or ordained minister.

501(c)(3)

By becoming a 501(c)(3), you take a giant leap in securing the future of the church. Large contributions to churches and ministries are always a welcomed blessing and having your 501(c)(3) gives great peace of mind to those who want to give. Individuals feel safe knowing their monetary gift is tax deductible.

Income and sales tax exemptions are valuable benefits available to churches and ministries, but it is important to note that many states do NOT automatically guarantee those exemptions without your 501(c)(3) approval letter from the IRS. Also, without the 501(c)(3) status, bulk mailing rates and most grants will not be extended to your church or ministry.

Finally, IRS Section 508(c) states that all churches are automatically recognized as exempt under 501(c)(3) and are therefore required to comply with all 501(c)(3) requirements.

In a 1996 court case, a federal judge ruled that just because Section 508(c)(1)(a) exempts churches from applying for 501(c)(3) status, it does not exempt the church from having to meet all of the requirements of Sections 501(c)(3) and 170(c).

While a church is automatically exempt under Section 508(c)(1)(a), the court ruled that "Nothing in Section 508(c)(1) relieves a church from having to meet the requirements of Section 501(c)(3) . . . its contributors must prove the church's right to an exemption under Section 501(c)(3) in order to be entitled to a deduction for their contributions" (Jack Lane Taylor v. Commissioner Of Internal Revenue).

In fact, if your church does not apply for 501(c)(3), you pass the burden of proof on to your members and donors. If any donor of your church gets audited, he or she will have to prove to the IRS that your church is operating in compliance with all of the requirements of Sections 501(c)(3) and many more. This may discourage many (particularly large donors) from giving to your church.

By taking all of the necessary steps, you secure a bright future for your church or ministry. You never know the day when a perfect stranger will walk into your office with a large check in hand saying, "I want to give this to your church." You can receive the donation without hesitation because you can show proof that you are a 501(c)(3).

Sales/Use Tax Exemption

Day after day churches purchase things for the ministry and pay anywhere between 5 and 8.5 percent sales tax. Most churches should not have to pay these taxes. No pastor in America would refuse an eight percent increase in their tithes and offerings. However, too many ministers unknowingly refuse such an increase simply by not becoming sales tax exempt. It is one of the wisest decisions you can make in the legal establishment of your church. All of the purchases or lease agreements that your church makes exclusively for its own purposes will qualify to receive this exemption. For example, say a church in Indianapolis, Indiana purchases a church van for the price of $17,500.00. After calculating the sales tax, the total price increases to $18,550.00. However, if the church has sales tax exemption from the state of Indiana, it will not have to pay the sales taxes. Savings on the church van amount to $1,050.00. These are substantial savings that add up over time and can be used for other outreach ministries. As a leader you are called to be a good steward over your church's finances. So why not apply for these exemptions?

If you are ready to get your church off to a good start now is the time to act. Do not let time pass you by.