In this article, we will examine three different ways a church can get started. Starting a church in the United States is relatively simple. Please keep in mind the church is always the people, and what this article is about is the Administrative/Legal/IRS aspect of the organization.
To get an approximate cost to start a church, see: Cost to Get Started
Following are three different ways a church can begin.
1. A church can be started as an “Outreach,” or a “Daughter” church outreach of an existing church. There should be clear documentation found in the Minutes regarding all the details of the relationship between the Mother/Daughter churches, regarding [but not limited to] limiting all proposed actions of the Daughter church, to the approval of the existing church Board of Directors whether it be financial or otherwise; All receipts for tax purposes would be issued by the ‘Mother’ church Treasurer. We have written a sample resolution in our SAMPLES Manual to help you identify the issues of starting a church this way. Receipts for contributions to the church, can be written to donors from the very outset. Receipts for contributions to the new church, can be written to donors from the moment the Board of Directors of the ‘Mother church,’ pass a Resolution authorizing the formation of the new outreach church.
2. A church can begin as an “Unincorporated Association” and be tax exempt on its own – so long as it has organizational documents [By-Laws], which include the four key statements required by the IRS, and essentially fulfill the intent of the 14 points found under the 501(c)(3). Minutes of the meetings [and other records] of the Board of Directors would also be essential. We do not recommend this approach, but if you are interested in having more information, please contact us for further details and samples of excellent Foundational Documents. Receipts for any contributions to the church, can be written to donors from the moment you have your “Organizational Meeting.”
3. Form your own Non-Profit Corporation as soon as possible. This could be done in as little as a day , if you were to “walk the documents through” the office of the Secretary of State, or their extension offices. Otherwise, it will likely take a few months if mailed to the state capitol. Some states [eg. California], also require filing for exemption, and approval, to be exempt from the state Franchise Tax. The overall time frame, to get organized, is pretty much up to you and how quickly you follow through. The most important [and time consuming] task is in writing good Biblical By-Laws, that will give you something of substance to mount a defense, should the church ever face a lawsuit. We have written three On Line Articles about Biblical Church By-Laws you really should read.
Please read this article about Church By-Laws. It is imperative to protect your church and Pastor with Biblical, New Testament By-Laws. A church government that would allow the pastor to be removed by a congregational vote is totally un-biblical. God intends the Pastor to have authority, yet balanced with Biblical Accountability.
Receipts for contributions to the church, can be written to donors from the date of the “Organizational Meeting.” This is the first meeting held by the Incorporator(s), when the organization is legally formed, and By-Laws are adopted. We have sample Organizational Meeting Minutes in our More Great Samples Manual.
The process of starting a church is too often made more complicated and expensive, by unhelpful professionals more interested in financial gain, than in teaching the simple facts, and fulfilling the basic IRS requirements.
Too often we hear of a church started under the ‘umbrella’ of an “Organization of Churches,” under the impression they are “Covered” by that organization’s 501(c)(3). They are usually required to pay them an annual fee [usually called a "Tithe of their tithes," or some such arbitrary percentage. This is totally unnecessary, and a waste of the church monies! I have said many times, that the church IS tax exempt [or as some insist in calling this "having our 501(c)(3) " Why not just start the church in one of the three ways described above? No church needs the "covering" of an organization of churches or ministries.
The church is not required to Incorporate. It is required to organize the business activities of the church, in order to qualify for tax exemption. Adopting Church By-Laws is how you organize the business activities. Tax exemption has absolutely nothing to do with incorporation. No law [state or federal] requires the church to incorporate. We do recommend the church incorporate, as this provides an “Umbrella” of limited liability protection. There are other reasons for the church to incorporate, and we have addressed them more fully in “The Church Administration ‘How To’ Manual.”
We have discovered, in about 80% of the more than 3,000 churches we have ministered in – that there is a tremendous problem in regards to a lack of [often no] adequately written Minutes. Minutes are crucial in a lawsuit. Minutes are the “Memory” of the legal entity, the corporation, and if there are no minutes – there is no memory or defense. This is why we have written the SAMPLES Manual, which contains more than 100 examples of Minutes, Resolutions, Ratifications and Policies, to show you “How To” do these things.
We have also discovered that 80% of the churches never had an organizational meeting. This is really bad news, for that is the very first thing the Judge would look for in a lawsuit. If this is something that applies to you, we have written More Sample Minutes which has sample Resolutions that you can use to clean up your Minute Book. This Manual teaches you “How To” write a legal Minute today, that will RATIFY your organizational activities.
If you would like more information about similar issues, please consider “The Church Administration ‘How To’ Manual.” This Manual, endorsed by three CPA’s, an EA and two attorneys, was updated again in January, 2011, for the 12th time, since its original publication in 1991.
The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE – Rev. Don L. Buckel
Copyright © 2003 by Administrative Assistance