We do all the work to form new churches. We off a quick, straightforward solution to the set up church that is a state non-profit corporation with formal 501(c)(3) status. If you’ve handle the corporate and tax aspects of setting up a new church, here is a summary of the some of the steps you should consider, but please contact us if you’re ready to make sure your church is started the right way, the first time.
1. Make a Plan to Start a Church
As you’re making plans for your church, it’s important to clearly define its ministry, where it will operate, when it will conduct services, and how it will fill serve the members and community.
2. Select a Name for the New Church or Ministry
Pick a name for your ministry or church. Check availability of your desired name by conducting a name search with your secretary of state.
3. Recruit a Board of Directors (this may be the church council)
Remember that no one owns a nonprofit — not the pastor, not the elders, not the church council, not the staff.
Since no-one owns a church, it is important to clearly set out the church’s management structure. In most states, the corporation’s management is often the board of directors and/or members. Each state has different requirements; check with the secretary of state.
- You will need to set out who manages the church very clearly in your formation documents – the articles of incorporation (sometimes called certificate or formation) and in they bylaws.
- Some nonprofit corporation churches are member-managed; those members may have certain rights, such as voting. Other nonprofit corporations may be director-managed. Some have a combination of member and director management.
- Each state has different requirements on the number of directors; check with the secretary of state.
- Each state sets out legal duties for the directors and officers.
4. Select the Church’s Business Structure & File Corporate Formation Documents
Business structures are state law concepts. A common business structure for churches is a nonprofit corporation. Other options in some states include a B-corporation, a nonprofit LLC, an L3C, and an unincorporated nonprofit association.
Draft and file documents to become a state nonprofit corporation (or other appropriate state entity). Check with your state’s secretary of state on business options.
Note: If the church files as nonprofit corporation, it probably will include in that filing document:
- Church name
- Name of initial directors
- Registered agent’s name and address (a registered agent is the person responsible for accepting lawsuits, certain government notices, and legal notices for the organization)
- Statement on membership (members or no members)
- Statement that the organization is organized for religious purposes
5. Prepare the Church’s Bylaws
Bylaws are the church’s operating manual. They set out the rules that govern the internal management of an church.
The initial board of directors should prepare and adopt bylaws for the church simultaneously with the preparation of the articles of incorporation or soon thereafter. A copy of the bylaws, signed by a corporate officer, are submitted when applying for the federal tax-exemption.
6. Hold an Initial Organizational Meeting
Your new nonprofit church’s board of directors (church council) will hold an organizational meeting to complete the business formation of the church. At this meeting, the organization should approve the bylaws, elect additional directors, appoint officers, and approve initial resolutions such as opening a church bank account. Remember that it is important to keep minutes of this meeting.
7. Apply for a Federal Employer Identification Number – EIN
Your church will obtain an EIN regardless of whether it will hire employees. This number will be used on all federal tax returns and receipts. Additionally, your church needs an EIN to open a bank account. To obtain an EIN, your church should complete IRS Form SS-4, available on the IRS website.
8. Apply for 501(c) tax-exempt status with the IRS
To apply for federal 501(c)(3) tax-exempt status, a nonprofit corporation applies to the IRS using Form 1023. However, there is an exception for churches. For example, the following types of organizations are not required to file Form 1023 for recognition of exemption under Internal Revenue Code section 501(c)(3):
- Churches, including synagogues, temples and mosques.
- Integrated auxiliaries of churches and conventions or associations of churches.
Contributors’ contributions to these types of organizations are tax deductible. Although there is no requirement to do so, many churches seek formal IRS recognition because recognition assures contributors that contributions are deductible.
We help our church clients with the full set-up of their church, including the preparation and filing of IRS Form 1023. This way, our church’s members and contributors have assurance of 501(c)(3) tax-exemption.
9. Apply for State Exemptions and Permits – State Tax Exemption
The state comptroller oversees collection of state and local taxes, fees, and assessments. Many state laws allow churches to be exempt from paying sales tax, hotel occupancy tax, and franchise tax. You must apply for these state exemptions; it is not automatic.
Your church may also need to obtain applicable licenses and permits.
Some may include:
- State tax-exemption applications – sales tax, franchise tax
- State or local business licenses
- What is the Difference between Nonprofit and Tax-Exempt?
- Who Owns a Nonprofit
- What is the Difference between Articles of Incorporation and Bylaws?
- What are the Duties of Nonprofit Directors?
Get assurance that your church is set up the right way, the first time
The Cullinane Law Group provides a quick, straightforward solution to set up a new church or religious ministry with formal 501(c)(3) status. From drafting your governing corporate documents and obtaining federal tax exemption, to counseling on compliance and reporting requirements, we offer complete flat-rate packages to get your church off the ground. We set-up and provide legal help to churches and ministries, including camping ministries, church plants, international missionary organizations, and church group exemptions.