Launching a new ministry is very exciting! You are flooded with new ideas, a vision of impacting your community, and helping people in need. These are wonderful ambitions and are important elements to launching a healthy church.
As an attorney who has served on a church staff and is still active in leadership in the local context, I have seen first-hand the importance of establishing the correct structures from the beginning of a new church. While it may seem that the organizational stuff can happen later because you want to be busy doing ministry, not taking these important steps will actually hinder your ministry in the long-run.
These are 3 legal steps you need to take to launch a healthy church:
- Establish A Healthy Governance
The first step a church needs to take is often the last step many churches leaders make. All church leaders need healthy people around them to help them govern. I have never met a ministry leader who has set out to have any issues within their church. But, let’s face it, we are all humans and we all make mistakes. One of the ways that you can minimize the impact of mistakes and diversify the responsibilities is to establish a healthy church governance structure that is consistent with Biblical requirements. Select people who share your vision and who will support you and hold you accountable, be very clear about their roles and responsibilities, and then make sure you develop a culture of communication and trust.
Legally, every church that intends to operate as a non-profit entity in Texas must have at least 3 individuals (directors/elders/deacons/governors) who take responsibility for the entity. These individuals are legally responsible for the operation of the church. Choosing these individuals is much more complicated than simply picking friends. They are each potentially liable to the attorney general and/or the IRS for any malfeasance within the church. Each of them should be trained so that they understand their duties and obligations.
The governance of your church is an important structure to have in place not only for your leadership, but also for the membership as well. As your financial contributions increase, it brings potential donors the comfort of knowing that there isn’t one person making all of the decisions, but a team of people who have taken responsibility to ensure the organization is led well.
- Correctly Register With The State
I’m always encouraged when I meet with a minister or ministry team in forming a new legal entity for a church. It is extremely important to nail down the structure early. The benefits of having the legal structure in place are obvious, e.g. tax exemption, church governance, and liability protection. Most importantly, the process of establishing a non-profit corporation with the State of Texas, and achieving all these benefits, is not complicated for a trained professional; the expense should be minimal.
It is important that the person doing this work understands the laws of the State and Federal laws. Setting up your entity correctly with the State of Texas is essential to obtaining 501(c)(3) status with the IRS.
- Obtain Federal Non-Profit Status
Churches can technically operate as a non-profit entity without filing with the IRS for 501(c)(3) status. However, even though you do not need to seek formal recognition from the IRS, all churches must comply with all of the requirements of 501(c)(3) to legally operate as a non-profit. Failure to do so can create liability for staff, governing board members, and donors. In fact, if a church donor is audited and the IRS has not recognized their church as exempt, it is possible that the IRS will disallow their donations unless the member can prove that the church is operating as a 501(c)(3). This can cause serious problems for church members. In addition, all churches must seek recognition from the IRS if they are (1) accepting gifts from donors out of state or (2) intend to receive any donations or gifts in kind, e.g. stocks, bonds, cars, or real property.
The process of obtaining this status can be an arduous task. I have come alongside folks who have attempted to establish this filing on their own and it often required more time to clean up their mistakes than it would have if they had partnered with an attorney to help them through the process.
The mission of a church planter is to do ministry. While it is clear that there is much prayer, thinking, dreaming, and planning that goes into establishing a healthy church, I hope that these tips will help you and your team to understand the importance of correctly establishing legal structures for your church so that you are then protected and provided with the best opportunities to reach and minister to your community.
If you would like more information on how I serve churches and non-profits in the State of Texas, please click here to fill out a brief from.
