"How to Sue a Church" . . . Really?

By Trey Lewis

I was up late the other day doing some research on church compliance and tax law. I was about to call it a night when I came across an article entitled “How to Sue a Church.” In short, the article was providing advice on what to do if someone wanted to sue a church.

In that moment, I was reminded of the times we are living in and the types of issues pastors are facing in today’s world. It is true that we live in the most litigious society in the world and there are over 1,000 lawsuits against churches each month in the U.S. This statistic does not even include the thousands of legal matters that do not make it to court.  

My desire is for you, as a pastor, to be empowered with the necessary information needed to walk successfully and confidently in God’s calling on your life without getting sidetracked with legal issues that plague churches today.

In this blog, I want to provide you with some powerful strategies that you can implement to establish or strengthen your church’s legal foundation. 

Will you be like the wise builder?

As I write this article, my prayer is that it somehow makes its way to you. If you know of a pastor who would greatly benefit from reading this article, then I encourage you to share it with him/her. Now is the time for us as the Church to stand together arm in arm and support one another. 

In this article, I am going to share with you some steps and strategies that you can begin taking today for your church. 

Whether your church is about to start, or whether your church has been around for 100 years, you will receive some valuable information in this article that will help you and your church to weather any storm that may come your way. 

So, my question to you is, “Will you build your church on a rock or on the sand?”

Why you should establish your church’s legal foundation now

Many of you reading this blog may not have officially started your church, or perhaps you just started your church a few months ago and are thinking to yourself, “I will get around to the legal stuff once the church has gotten settled.”

That is a perfectly rational thought to have, but I want to give you two reasons why you should not wait to establish your church’s legal foundation.

1. Legal protection: Establishing your church or ministry on a solid legal foundation removes liability from you and your church members.

2. Tax-deductible donations: Once you incorporate your church, you will be able to receive tithes and offerings, and issue tax-deductible receipts to your donors. What does incorporating your church have to do with this? I am glad you asked. Incorporating your church gives it a provisional nonprofit status before you receive your official 501(c)(3) tax-exempt status. This provision is only available for churches, and it can help you to obtain the necessary capital to start your church or to help continue to grow your church. 

Whether you pastor a brand new church or an already existing church, next we will look at how you can establish or strengthen your church’s legal foundation.

How to establish or strengthen your church’s legal foundation

There are several steps that you can begin taking today to strengthen your church’s legal foundation and help you, your church, and church members from frivolous lawsuits.

I understand that some of you may have already taken several steps mentioned below. However, if it has been a while since you worked on your church’s legal foundation, then it might be time for you to reinforce what you have already done and ensure you are protected against whatever may come your way. 

1. Incorporate your church.

When you incorporate your church, you create a separate legal entity from yourself and board members. By incorporating, you are shielded with what is known as the “corporate veil.” 

The corporate veil is a legal concept that involves liability protection. Under the corporate veil, if court action was taken against your church, the personal assets of the members would be protected. 

Often, many litigating attorneys attempt to pierce the corporate veil by trying to prove that the church did not operate as a corporation, and they claim that the church was an “alter ego” of the pastor and board members. 

Once incorporated, you will need to make sure your church or ministry maintains its corporate status with the state. Each state has its own set of guidelines for what this looks like; therefore, you will want to make sure you are informed and up to date on what yearly filings your state requires and when those filings are due.

By not maintaining these filings you are jeopardizing your church’s corporate status and the corporate veil of protection associated with being incorporated.

2. Create and adopt bylaws tailored to your church.

Second only to the Bible, your bylaws are the most important document to your church. 

Bylaws help protect your church from aggressive public accommodation laws that may violate your church’s First Amendment rights and religious liberties. This is one of the reasons why your bylaws need to be tailored to your church.

Far too often, we have seen church bylaws that are a hodgepodge of excerpts taken from the bylaws of various churches and ministries that have been deemed “successful.”

What you need to realize is that your church bylaws are a living document. Your bylaws are not something that you spend some time on early in your ministry, and then you forget about them later. 

Because legislation changes, so should your bylaws. Therefore, your bylaws will need to be updated periodically to reflect the current laws that could have a negative impact on your church.

(Recommended reading: "Why Bylaws Are Important, And How to Make Yours Better")

3. Implement policies and procedures.

If bylaws govern the fundamental and foundational structure of your church, then think of policies and procedures as what guides your church’s day-to-day activities. 

Implementing policies and procedures in your church will help protect the integrity and the vision of your ministry and they can help satisfy state and federal requirements. For instance, churches that go through our StartRIGHT® Program receive policies such as the following:

- Accountable Reimbursement Policy,

- Conflict of Interest Policy,

- Benevolence Policy,

- Indemnification Policy, and

- Anti-Terrorism Policy.

If you are interested in a resource that will provide you with more than 40 policies, check out our Documents Suite™, or give us a call today at 877-494-4655.

4. Stop thinking that you are a church outside of the law.

I often speak with pastors who have received information from pastor friends or online articles without checking the sources. One of the most common misconceptions I hear is, “We are a 508 church.”

Many believe this to be a church outside of the law. In other words, these pastors believe that if they do not apply for 501(c)(3) status, then the law will apply to their church like it may other churches and organizations that apply for 501(c)(3) status.

The simple fact is that this is not true; there is not even such a thing as a “508 church.”

Yes, section 508(c)(1)(A) does relieve churches of the obligation to apply for 501(c)(3) status; however, there is no provision under the law that relieves a church from being subject to the same laws, rules, and regulations as those that do apply for 501(c)(3) status.

When you take the step of applying for 501(c)(3) status, you are validating your church as a “legitimate” tax-exempt organization. This goes to show that you take your church’s responsibility as a tax-exempt organization serious and that you continue to put forth the effort of having a solid legal foundation.

5. Keep and maintain excellent corporate records.

Corporate records can sink or save a church in a court case. In the instance of an IRS audit, the IRS will spend a majority of its time in your corporate records. In the same way, if a litigating attorney tries to pierce the corporate veil, the majority of the attorney’s time will be spent reviewing your church’s corporate records. In short, your corporate records need to be well kept.

We recommend that you keep a digital copy and a hard copy of your corporate records. Such records include the following:

- All board meeting minutes and resolutions of the board,

- State approved articles of incorporation,

- Board approved bylaws,

- Your church’s 501(c)(3) approval, and 

- Any other pertinent documents or records of your church.

More than conquerors

As I finish writing this article, I am reminded of Romans 8:37 which reads, “Yet in all these things we are more than conquerors through Him who loved us.” You are a conqueror, and no matter what may come your way, the victory is already yours if you are willing to also do your part. 

However, you do not have to do your part alone. God allows paths to cross at certain periods in time because we were never meant to go through our journeys alone. Perhaps that is why your path has crossed with ours. 

At StartCHURCH, it is our honor to partner with pastors and guide them along the journey of leading their churches. In addition, we are pleased to help pastors establish or strengthen the legal foundations of their churches.

To learn more about how we can help you to establish or strengthen your church’s legal foundation, click on the link below or simply give us a call at 877-494-4655. We would love to hear from you.

Handpicked articles for you:

“Does a Church Need to be 501(c)(3) Approved?”

“Overcoming the Challenges of the 21st Century Pastor”

“How to Simplify All of Your Church’s Filing Requirements”

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