5 Questions on Church Incorporation
1. How does a church become incorporated?
Incorporation takes an affirmative action on the part of the church in order for it to be incorporated as a not-for-profit corporation under the laws of the state in which it is located. Typically, state law requires nothing more initially than that the church file “Articles of Incorporation” with the Secretary of State’s office. The state usually provides forms that are short and self-explanatory. Although the form meets the basic state criteria for filing, these forms often are inadequate for meeting the federal tax exemption requirements. Once the form is completed, it is to be sent to the Secretary of State’s office, along with the appropriate filing fee, where it will be filed by that office. Some states have agencies other than their Secretary of State that handle corporate filings. Once the articles of incorporation are filed, the church is officially incorporated. The church usually will be required to file an annual report with the appropriate state office, but this is only to ensure they have current information and is not something about which to be concerned.
There are some who believe that incorporating the church is the same as the church receiving a license from the state. The Christian Law Association does not believe such is the case. The term license means permission by competent authority to do an act which, without such permission, would be illegal. You do not have to be incorporated in order to lawfully have church. Therefore, the act of incorporating is not the same as accepting a license.
2. Other than the Articles of Incorporation, are there other documents we need?
Yes. It is imperative that you have Bylaws (also referred to as a “church constitution” or “book of order”) to ensure the smooth operation of your church corporation. Please remember that Bylaws are for internal use only, and you should not send them to the Secretary of State’s office when you file your Articles of Incorporation. In most instances, when there is a dispute as to the authority and duties of church officers, the court will look to the Bylaws to determine whether or not that officer acted within the scope of his duties. This is the most important document you will have because it sets out in detail the internal workings of your organization. A typical Nonprofit Corporation Act, for example, defines the term “bylaws” as “the code or codes of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name or names by which such rules are designated.” It is vital that this document be prepared properly, and that you include all of the protections available to you to safeguard against many of the lawsuits which are being filed against churches today.
Your Bylaws are so important that they should be reviewed annually to ensure they properly reflect the way you want the church to function. We at CLA consider this document so important we update our Sample Constitution and Bylaws regularly to make certain we have defenses to the latest legal theories being used to sue churches. You can obtain a copy of our sample constitution by writing CLA at P.O. Box 8600, Mason, OH 45040, or by calling (888) 252-1969.
3. Does the law provide any immunity from personal liability for the directors and officers of an incorporated church?
Normally state law will provide protection for the directors and officers of nonprofit corporations, but this immunity from civil liability is state–specific. The most common type of statute immunizes uncompensated directors and officers from legal liability for any negligent act committed within the scope of their official duties. Willful misconduct is not protected. You should check your state law to determine what protections the law gives you as a pastor, deacon, or trustee.
4. Does incorporation protect the members of the church from personal liability?
Generally, incorporation protects church members from personal liability. Of course, they may be sued for any tort they personally committed, but not for the actions of others within the corporation. A tort is a wrong causing injury to another person or property for which there is a civil remedy. The wrong may intentional or accidental. For example, if Mr. Brown strikes someone with his fist, he can be sued personally for his actions. However, Mr. Smith, who also happens to be a member of the church where this took place, cannot be sued simply because he is a member of the church.
Individual members of an incorporated church are not held liable for the church’s obligations because as a corporation, the church is viewed as an entity which has a legal identity separate and distinct from its members, even though it is still controlled by its members. Therefore, the church can be sued in its own right. This separate identity insulates the members from liability. This same immunity is typically not available to members of unincorporated associations.
5. If the church incorporates, is it placing itself under the control of the state?
Many people believe that by incorporating they are, in effect, accepting a license from the state. We do not believe this to be the case, but each church must decide that issue for itself. In making this decision you should remember the definition of “license”: “The permission by competent authority to do an act which, without such permission, it would be illegal. . .” (Black’s Law Dictionary, Fifth Edition).
While it is true that incorporation places the church under those laws which govern corporations, it does not mean that the state has licensed you to preach. You may form a church and preach the gospel regardless of whether your church is incorporated. What it does mean is your church is now recognized by the state as a separate legal entity. The laws of the state leave it up to the discretion of the not-for-profit corporation to determine what officers it will have and what internal rules will govern its operation. These laws also leave it up to the corporation to determine how best to fulfill the purpose for which it was organized, so long as there is no breach of the law. Incorporating simply allows the church to enjoy the convenience of holding property in the church’s name, allows the church members to enjoy freedom from personal liability, and allows the church organization to continue in existence in spite of large fluctuations in membership and internal church disputes.
Author’s note: David Gibbs is the president and founder of the Christian Law Association. Since 1969, CLA has been providing free legal assistance to Bible-believing churches and Christians who are experiencing difficulty in practicing their religious faith because of governmental regulation, intrusion, or prohibition in one form or another.
Contact the Christian Law Association free of charge for any legal help with your ministry by writing CLA at P.O. Box 8600, Mason, OH 45040, calling (888) 252-1969, or going to www.christianlaw.org.
This article was compiled to answer general questions regarding incorporated and unincorporated churches. It should not be viewed as providing legal advice. It should not be used to take the place of sound legal counsel from a licensed local attorney who practices in this field of law. The law varies from state to state, and changes on a regular basis from year to year. Before making any decision, contact the Christian Law Association or a local reputable attorney for answers to your specific questions and your specific circumstances.