5 Legal Steps to Start Your Church
By Valerie West
4 Minute Read
Are you passionate about starting a church or ministry? Maybe you're thinking it will be an easy and simple process, but once you factor in all the paperwork, legal procedures, and finer details, the process can become overwhelming.
You have to think through where the church will be located, how the services will be designed, creating a launch team, strategizing a financial plan, and more. The fact is, there are so many details involved in creating a new church or nonprofit organization that you may give up before you even start. Don't stop now! Let me encourage you not to give up. That's why StartCHURCH is here, to help you obtain the vision God has given you. Pastor, you are NOT alone—let us help!
First, let's walk through establishing a solid and legal foundation for your church. You may be wondering why this is important; establishing a solid legal foundation ensures your church is functioning in compliance and creates room for your church to grow. Because of the freedom and security it gives, it's one of the top priorities for launching a church or ministry.
Here are the 5 steps to start a church:
- Incorporate your church
- Obtain a Federal Employer Identification Number (FEIN.)
- Create and adopt Bylaws for your church
- Establish policies and procedures
- Apply for and obtain the 501(c)(3) tax-exempt status
Step 1: Incorporate your church
The first step in legally starting your church is choosing a name for your church or ministry. Check the Secretary of State's office (for the state in which your organization resides) to make sure no other organization exists with the exact same name. After securing a unique name, draft and file the Articles of Incorporation with the Secretary of State.
Your Articles of Incorporation should include a purpose statement, a dissolution statement, and other state and IRS provisional language.
If your church plans to ordain ministers, make sure that your purpose statement specifies that your church or ministry has the intent to license, ordain, and oversee ministers of the gospel.
Step 2: Obtain a Federal Employer Identification Number (FEIN.)
For your second step, you will obtain a Federal Employer Identification Number (FEIN) from the IRS.
This number becomes your organization's tax identification number. With this number, along with your Articles of Incorporation, you can open a bank account in the organization's name. Once you have a bank account, you can begin to receive donations.
It's important to note that applying for your FEIN must be done correctly, or it may lead to classification problems in the future.
There have been instances of churches incorrectly applying for the FEIN, waiting several years to apply for their 501(c)(3) status, and then receiving a revocation letter from the IRS. All of this can be avoided by correctly applying for the FEIN.
Step 3: Create and adopt bylaws for your church
After obtaining your FEIN, your church or organization will want to create bylaws.
Outside of the Bible itself, the bylaws will be the most important document to your church.
Bylaws help protect your church from public accommodation laws that violate the church's First Amendment right, including same-sex marriage laws, transgender laws, etc.
Your bylaws must change along with new legislation to keep them relevant. This document will need to be updated periodically to reflect the current laws.
To learn more about bylaws, check out these previous blogs:
Ask These 8 Questions For Solid Bylaws
3 Top Reasons to Not Use Generic Bylaws
Why It’s Important You Understand Your Bylaws
Step 4: Establish policies and procedures
To build a good infrastructure for your church or ministry, you will also want to develop and implement policies and procedures.
Policies are the documents that help govern day-to-day activities, and they help the church remain in compliance with both state and IRS regulations. While bylaws outline the governing structure and set the rules for decision making in the ministry, policies, and procedures guide daily operations.
Some policies you will want to implement include:
- Accountable reimbursement policy,
- Conflict of interest policy,
- Benevolence policy,
- Indemnification policy, and
- Anti-Terrorism policy.
- Social media policy (read more on our blog here.)
Step 5: Apply for and obtain the 501(c)(3) tax-exempt status
The final step in legally establishing your church or organization is securing 501(c)(3) approval with the IRS.
This is the most time-consuming and labor-intensive process of legally establishing your church or ministry.
The IRS estimates it takes anywhere from 100 to 150 hours to complete Form 1023.
IRS Form 1023 is twenty-five pages long, including all of the schedules. When correctly filled out, it can include anywhere between 50 to 70 pages of content for churches and 40 to 60 pages of content for ministries.
As you can see, a lot of time and information must be invested to complete this application.
We know many pastors and ministry leaders do not have this sort of time available to dedicate to this process. For this reason, we have created our StartRIGHT Service. We love to come alongside pastors and leaders of ministries to make sure they have a solid foundation for their organization.
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Extra Requirements
Some states have additional filing requirements. For example, thirty-one out of the fifty states offer sales tax exemption for churches and ministries. Still, you have to complete an additional filing with the secretary of state to obtain the exemption.
Other states require corporations in their state to pay a franchise tax annually. The franchise tax is a corporate tax levied on a corporation to do business, and yes, a church is considered a business in these states. This being said, some states allow churches and ministries to apply for an exemption from this particular tax.
The good news is that our specialists can also help you determine what exemptions your state offers and help you meet the filing requirements. You can learn more here.
Start the dream today
By now, you may be thinking this process will take a lot of time, resources, and paperwork, that you may not have or know how to accomplish; again, Pastor, don't worry, StartCHURCH wants to partner with you for the life of your church and/or ministry, so let us do the heavy lifting! Our church planting specialists are well-prepared in this field and know what it takes for churches and ministries to grow and thrive.
For more information on how to start a church or ministry, call us at 770-638-3444 or click the link below to schedule a call with a church planting specialist.
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