Most Common Questions Asked by Pastors

By Angie Joya

The beginning of the year is like a blank page in a new journal, full of opportunities to lean into the promises for the new year. In some ways, it’s an opportunity to take a step back, take personal inventory, and get back to basics. 

For some people, this is the time to seriously think about the next steps they need to take after they have said “yes” to what God is calling them to lead. This is especially true of church planters. 

At StartCHURCH, we get a lot of questions from church planters and ministry leaders. So, we would like to use this blog to address some of the most common questions that church planters and ministry leaders are often asking.  

“Should I incorporate my church?”

More than ever, establishing your church or ministry as an ecclesiastical corporation is of absolute importance. Many lawyers and companies will tell you that starting a church is just like starting a business. While the process may be similar, there are many nuanced differences between starting a for-profit corporation and a church. 

One major difference between a business corporation (such as an LLC or an S-Corporation) is that a nonprofit isn’t owned by one person or a group of individuals. So, how does that work? In order for a church to be able to transact business, it must become a legal entity in order to transact business. 

Each state has its own requirements for what needs to be detailed in the document. Most often, this document contains information like the name that is intended for the corporation, the purpose of the corporation, the name and address of a registered agent, and the information about the nature of the nonprofit. (A registered agent is a person who resides in the state in which the organization is incorporated. This person must have a physical address in the state and acts as a contact person to receive notifications about the nonprofit from the state.) 

The document that contains all this information filed with the secretary of state is called articles of incorporation or may be referred to as articles of formation. Once the state has approved this document, the church or ministry can, in essence, function for itself. For all intents and purposes, receiving approved articles of incorporation back from the state is like receiving a birth certificate for the corporation. Once the articles of incorporation have been approved, your church, ministry, or nonprofit is in official existence. 

Another major benefit of being incorporated is that once incorporated, under state law, the church is afforded limited personal liability protection, known as indemnification.  However, in order to keep the indemnification, the church has to show that the pastor and board of directors do not act for themselves when church decisions are made, but rather as directors of the church and on behalf of the church. This is commonly known among legal circles as having a "corporate veil of protection." This is also true for any nonprofit or business that chooses to get incorporated.

“What about the IRS?”

The process of “getting started” is, in a way, two-fold. When starting an organization, whether a business or a type of nonprofit, there are at least two levels to register: state and federal (with the IRS). 

Typically, after getting incorporated at the state level, churches and ministries obtain a federal employer identification number from the IRS. A federal employee identification number, more commonly referred to as a FEIN or a tax ID number, is used to identify a business entity. 

Basically, the tax ID number of the corporation acts as a social security number. In any situation where a social security number is required, instead of using a person’s social security number, the federal employer identification number is used. One of the primary purposes is so that a church can function independently without a person or member of the corporation needing to act on behalf of the organization.  

Obtaining a federal employer identification number is relatively quick and can most often be obtained online. Keep in mind, though: having a federal employer identification number does not mean a corporation has 501(c)(3) approval from the IRS. Obtaining 501(c)(3) approval from the IRS requires an application process. 

Keep in mind, there is a myth that churches don’t have to apply for 501(c)(3) approval from the IRS. While applying for 501(c)(3) status is optional for churches (and only churches), the decision to not receive approval can be costly. We see in court cases, such as Jack Lane Taylor v. Commissioner, that the burden of proof is placed on donors of churches without 501(c)(3) status. This means that if a donor is audited, they must establish or prove that the church to which they give meets the requirements and qualifications of a section 501(c)(3) organization.

What a burden for an individual to carry! For this reason, many donors may choose to not give or donate to organizations without a 501(c)(3) approval. In addition, the presumption of tax-exempt status does not exist unless the church has been officially recognized by the IRS to meet the requirements of section 501(c)(3). You can read more about that in this blog, “Are There Any Benefits of 501(c)(3) for Churches?”

“Do I need to have bylaws?”

Bylaws are defined as a set of general rules and regulations that guide and direct the daily affairs of the members of an organization. Bylaws are crucial for churches and ministries because when properly structured, they do the following:

1. Clarify the purpose of the church;
2. Provide protection by distinguishing the theocratic government of the church;
3. Give guidelines for how the board can and cannot make decisions;
4. Guide the board in how to establish policies and procedures for the church, including succession, finances, ordination, membership, etc.; and
5. Give guidelines to help ensure that the board is operating according to IRS regulations for tax-exempt organizations.

In essence, bylaws are the driving force that helps a church run smoothly. When bylaws are well-written, tailored to your church’s beliefs and governing structure, and utilized correctly, they can effectively streamline the focus of your church. 

Furthermore, your church’s bylaws can provide invaluable guidance and protection for your church. However, when your church’s bylaws are not structured well and are incompatible with your church’s values and mission, then you may find that you have a document that actually works against you, not one that is for you.

You can find out more about how well-written bylaws can be a great help to churches in need by reading this blog, “Bylaws Save Florida Church from Lawsuit.”

A partner you can trust

The start of every new year comes with many challenges, but with the right vision and the right partner, like StartCHURCH, the questions will become fewer, and direction will become clearer. Our mission is to help pastors, church planters, and ministry leaders protect what God has called them to lead. If there is any way for us to serve you, please let us know!

Stay tuned for more blogs like this in which we address more questions pastors and ministry leaders ask. 

What questions do you want answers to? Let us know in the comments below. 

If you have more pressing questions, give us a call at 877-494-4655 and ask to speak with one of our helpful specialists. 

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