FREQUENTLY ASKED QUESTIONS ABOUT INCORPORATING A
- If incorporation is not required by law, and we have not incorporated
our church up to this point, why should we consider incorporating now?
Though it is not required in the United States for churches to
incorporated, in recent years, a large number of churches in the United States have chosen to incorporate rather than remain as unincorporated associations, for several reasons to include legal and
- What is an unincorporated association?
An unincorporated association is defined as the “voluntary association of
two or more individuals under a common name for a particular purpose.” The association is not a separate and distinct entity from the individuals.
- What are the disadvantages to an unincorporated association
- Property Ownership (operational consideration): The unincorporated church does not own, and cannot transfer, property in its own name. Instead, in Virginia, property is
titled in and can only be transferred by Trustees of the church. Prior to any transfer of property, the church must petition the Court to (i) affirm the identities of the Trustees; and (ii)
approve the transfer of property by the Trustees in accordance with the consent of the congregation or membership.
- Ability to Contract (legal consideration):
The unincorporated church cannot contract in its own name. Instead, the Trustees of the church contract on behalf of
the unincorporated association, thereby putting themselves personally in a position of liability for the church’s performance (or lack thereof) in accordance with the Contract.
- Liability (legal consideration): The unincorporated church cannot sue or be sued. Instead, the Trustees of the church could sue or be sued. If
someone had an accident at the church and sued the church, it would be the Trustees, the members, the elders, and the deacons personally who could be sued, thereby finding themselves personally in a
position of liability. Certain incidents or occurrences are exempt from insurance coverage such that the Trustees, the members, the elders, and the deacons could find themselves without
insurance coverage to assist with legal defense and the payment of a monetary judgement.
- What are the advantages to incorporation?
- Identity (legal and operational consideration): A non-stock corporation is an entity pursuant to Virginia law which has its own identity separate and apart from its individual
elders, deacons, directors, or members.
- Property Ownership (operational consideration):
An incorporated church can own and transfer property in its own name. No court petition is
- Ability to Contract (legal
consideration): An incorporated church can contract in its own name. Its contractual
liability for breach of contract is limited to the assets of the church and does not extend to the assets of any individual members, deacons, elders, or directors.
- Liability (legal consideration): An incorporated church can sue and be sued. If someone had an accident at the incorporated church and sued the
incorporated church, because the church is an entity separate and apart from the members, deacons, elders and directors, it is the party to the lawsuit, and only its assets would be subject to
liability. Individual members of the church would not have any liability unless they personally caused the accident. For example, if Mr. Jones strikes someone, he can personally be sued and the
church could be sued. But, Mr. Smith, who may also be a member of the church, cannot be sued simply because he is a member of the incorporated church. The same would not be true if the church
were unincorporated. For example, if a child were abused at an unincorporated church, and the insurance company denied coverage for the church, the injured child’s parents could sue members of
the church even if they were not part of the abuse, because of their association.
- What is the process for incorporating in
- Choose a name.
- Identify the Board of Directors.
- File Articles of Incorporation with the State Corporation Commission.
- Adopt Bylaws.
- Change bank accounts, real property deeds, vehicle titles, insurance policies, service
contracts and all other assets to the corporate name.
- What does incorporating do to our Church’s tax-exempt
Churches that meet the requirements of IRC Section 501(c)(3) are
automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS. Although there is no requirement to do so, many churches seek
recognition of tax-exempt status from the IRS because this recognition assures church leaders, members, and contributors that the church is recognized as exempt and qualifies for related tax
benefits. Incorporating as a nonstock corporation has no effect on tax exempt status.
- What happens to our current bylaws?
Lebanon Christian Church has a current set of bylaws. Those bylaws will be
incorporated into a set of bylaws that conform to Virginia law for corporations. All the substance of the current bylaws will be incorporated into the new set that is adopted. The bylaws are
not required to be filed with the State Corporation Commission or become public record.
- Does the congregation lose any control or voting rights as it relates to
operation of the Church?
The bylaws will set forth the voting rights of the members of the
congregation and will mirror the existing voting rights set forth in the current Bylaws.