Starting a Church

[rev_andrew]

Hey everyone,

I am in the early process of establishing my Church, and I have a few questions. Firstly, I understand that Churches are exempt from taxation automatically, and are not required to file a form 1023 to receive this exemption (IRS Publication 557).

1) Does this refer only to incorporated Churches, or can Churches established in a similar manner as a secular sole proprietorship be included in the exemption?

2) I found a website which states that incorporation is not required to receive tax-exemption, and it says you can establish as a sole-proprietorship. How accurate is this statement?

3) What is required to make my Church a legal entity? (I do not want to incorporate unless absolutely necessary)

I was told my the Circuit Court clerk and by the Commissioner of the Revenue that I need to speak with an attorney, but I cannot afford consultation at this time. I am hoping that I may begin with some answers here. Thank you

EDIT: My reasons for not wanting to incorporate are related to my inability to accept government intervention in ecclesiastical matters, i.e., the inclusion of churches in Title 26, Section 501(c)(3), when they are automatically tax-exempt, the ability for the government to revoke that status from incorporated entities, et cetera. I feel that this is an unacceptable violation of Church-State separation.

Hello,

I don't know the answers for your questions, but I have found a website with some related informatin, see the link below.

Churches and State Law Considerations - Thompson & Thompson

Maybe they can provide some advice to you for free.


TAX EXEMPTION SERVICES

Churches & Religious Organizations

• An Open Letter to Pastors & Church Leaders
• IRS Definition of A 'Church'
• Churches and State Law Considerations
• Incorporation and 501(c)(3) Status
• Tax Provisions Affecting Churches
• Tax Provisions Affecting Clergy
• Religious Counseling: Duties of Disclosure
• Domestic Funding of International Operations
• Foreign & Domestic Charities Relationship
• Guidelines for Funding Foreign Charities


Churches and State Law Considerations

A. CHURCH BYLAWS. 1. By far, the most important legal document of any church is its bylaws. At a minimum, in addition to standard provisions relating to corporate procedure and structure, liability limiting provisions, federal tax provisions, the handling of contributions, etc., every church's bylaws should contain the following unique provisions, either by express statement or incorporation by reference to another organic document of the church: a. A statement of faith or a religious creed, stating with particularity the fundamental religious tenets of the organization. b. Procedures for, and qualifications of, the ordination of clergy. c. A statement of those ceremonies, rituals or practices considered to be sacramental (i.e., sacerdotal functions), and to what extent their exercise is restricted to ministers or other ordained persons.

B. CORPORATION LAWS. 1. Church corporations are governed generally by the state Nonprofit Corporation Acts, as are other nonprofit corporations. However, other more specialized state laws may also apply, for example: a. Church Trustee Corporation laws. b. Ecclesiastical Corporation laws. Note: unlike general nonprofit corporations, which may be formed by one incorporator, ecclesiastical corporations are often required to have three (3) incorporators. c. Many states have special (usually very old) statutes directed toward specific churches and/or denominations. 2. Church corporations often use specialized forms in connection with their Articles of Incorporation, such as in Michigan. California has a separate statute and forms for all religious corporations (not just churches). However, this is not true in all states. 3. Must a church corporation have voting members? The presumption may be yes, nonetheless many states allow a church to be formed as a directorship corporation.

As a practical matter I think you will see that some form of cor.p entitiy is the best, but it is not 100% required.

We were looking at this in my hometown as well. Not sure what we will do yet.

[rev_andrew]

I have decided to incorporate. The fee is minimal ($75). The liability protection and the ability to own property in the Church's name is worth it.

In Virginia, the only alternative is the appointed-trustee system which, until recently, imposed legal liability on all members of the congregation. Even now, the liability protection provided by Virginia law for this system is minimal, and I refuse to impose any liabilities for which my Church is responsible on any member of the congregation.

Also, this will make obtaining and using a FTID (EIN) much easier, as the legal record of my non-stock corporation would be on the State-level, and public, whereas, a DBA as an unincorporated association would only be on a local level.

Thank you all for your replies.

[evang_Smith]

rev_andrew - I have the same issue as you did on deciding whether to I should incorporate or not? Can you tell me why and what you did to incorporate in VA? Thanks.