Church General Counsel will host the following webinars for pastors, church leaders, and any others interested in these topics during the month of March:
Each webinar will be at 3:00pm Central Time and have time for questions, answers, and comments from attendees. Click on the links above to learn more and sign up.
Church General Counsel will host a 1-hour church security webinar on March 1, 2018 at 3pm central. Topics include:
Articles of Incorporation (we’ll call them AOIs from here on out) are found in a written document filed usually with the Secretary of State in the state in which a church exists that form that church as a legal entity in the eyes of the world. Banks will usually require a copy of the AOIs before letting your church open a bank account so that they can verify that this organization is real. There are several components that should be in your AOIs. Because they are so basic, they do not usually change. This is unlike your bylaws, which are more detailed and therefore more open to change. Here are just a few of the things that need to be in most AOIs.
Name of the Church
The AOIs will first state the name of your church. The articles will tell the world – the government, banks, vendors, members, and the like – the name of the organization they are interacting with. If you’re launching a new church, then obviously you’ll need to have the name of your church firmed up before filing the AOIs. If your church changes its name, the official means of doing so is through amending the AOIs.
Period of Existence
Your AOIs will tell the world how long the church will exist. Very rarely would any organization want to put an expiration date on their endeavor, and certainly not the church. While eternity is not in the government’s vocabulary in terms of AOIs, most organizations indicate in this section that the organization will exist into perpetuity.
There are two primary components of the character of a non-profit organization that should be in your church’s AOIs. The first is a prohibition against "private inurement." This is tax prohibition based on the notion that if the government is not going to tax the organization, the organization’s receipts over budgeted expenditures cannot flow to a private person. The second component deals with what happens to the assets of a non-profit organization if that organization closes its doors. While we don’t want churches closing their doors, statistics show this is becoming a much more common occurrence. Tax law prohibits the assets of a non-profit from going to a for profit endeavor or a private party, so specific language is necessary to ensure that non-profit assets go to a similar non-profit endeavor on dissolution.
Your church’s AOIs should tell the world not only who they are interacting with, but where they can interact with your church. Your AOIs should clearly state the address of the church’s primary location. This can be difficult for church plants. I know of some church planters in very difficult locales within the United States that have to move frequently. The principal address should be updated with each move. House churches may not meet in the same house every week. In that case, one location should be designated the principal address.
Your church’s AOIs should also tell the world who has the authority to accept service of process in the event they need to sue your church. The registered agent is the person or entity that can accept the complaint filed against your church and the summons directing it to file an answer or be subject to a default judgment. Some churches designate a trustee as their registered agent. A volunteer should never be the registered agent. Too much is at stake. Many churches designate a pastor as the registered agent, but the church must remember to amend their AOIs if the pastor resigns or retires. In the business world, most reputable companies hire a registered agent that is an independent third party or the church’s lawyer. This is probably the best practice for churches too.
The last component of your church’s AOIs is a statement of basic governance. Is your church governed by an elder board or is it more congregational? Or is there a diocese or other office that your church reports to? The world needs to know all of these things, the specifics of which will be spelled out in your bylaws. It suffices to have a simple, one sentence statement of how your church will be governed in the AOIs.
One of the first things we look for at Church General Counsel when we take on a new client is the church's articles of incorporation. We can recommend a variety of changes to the church's articles if any are needed. We can serve as your church's registered agent for no additional fee.
Three More Qualities of a Good Church Leader
Go to the nearest Christian bookstore and you’ll find title after title on good leadership in the church. The frenzy on leadership has grown so much that there are seminary degrees in biblical leadership. Churches are taking secular leadership and organizational management books and incorporating what they can into the church. There is a focus on people development, mission, vision, strategy, goals, pipelines, and execution. These are all great things. But when was the last time you read a leadership book on the unique combination of theology proper, spiritual practice, ethics, creeds, ecclesiology, constitutions, policies, committees, boards, and American law that is church governance?
In most universities, business schools teach their students business law as a requirement. This is lacking in most seminaries. While the leaders of any for-profit endeavor that makes a few hundred thousand dollars each year will understand the basics of legal compliance, human resources, risk management, and the like, few employees of a church with a similar budget have the necessary training and education to lead the church in a manner that properly complies with the law and minimizes legal risk. They just don’t teach that in seminary.
Governance is the action or manner of conducting the actions, affairs, and policies of a state, organization, or group of people. The church is an organization and a group of people, so based just on these to premises it is clear that churches may need governance. If the question is whether a local church needs governance, the subsidiary questions are whether churches should act, whether churches have day to day affairs to conduct, and whether churches need policies. The answer to each of these three questions is a resounding yes, and therefore churches must be governed. If you are a church leader, church governance is your responsibility.
1. Good leaders move the church to act.
Churches must act. and good leaders move the church to do so. If the five-fold purpose of the church is to worship, fellowship, engage in discipleship, minister, and evangelize, then the church that does not act at all is not a church at all. Churches do things. They have worship services. They admit members. They have programs designed to educate and equip believers. They do weddings and funerals, christenings and baby dedications. They conduct baptisms and the Lord’s Supper. They serve meals and conduct free medical and dental clinics. Churches act, and every action any organization takes carries at least one legal ramification or risk. As such, churches must have a manner or a system in place by which those actions are planned, funded, authorized, and executed. Churches need good governance to make this happen.
2. Good leaders pay attention to details.
Churches have day to day affairs that must be managed, and good leaders see to these day to day details. Churches hire and fire employees in a relationship that is highly regulated to begin with, not to mention the exception to every rule that churches face. Those employees counsel believers and non-believers alike. They maintain facilities in good working order. They engage in business with vendors and contractors. They rehearse music written by other people. They answer telephone calls. They handle money and process donation receipts. They address benevolence issues as people come in needing assistance from the church. They plan and prepare for the next weekend. Most of these details are either regulated by federal and state governments, or carry their own set of legal ramifications and risks. In order for these day to day affairs to be conducted properly, churches need good governance.
3. Good leaders rest on good policy.
Churches need policies, if for no other reason than churches are unfortunately notorious for some relatively petty power struggles. Who gets to decide what color the carpet is? Who gets to decide who uses the church van on what day for what function? Who gets to decide who gets married in the church? Who gets to decide who can have their wedding anniversary party at the church? Who gets to decide what kind of music is sung in the worship service? How do we decide who to hire? Who gets to decide when to fire someone? Who gets to decide when the doors will be open? Who gets to decide who has a key to the church? What do we do when there is an accident at the church? How do we select volunteers to work with minors? Where will the money be counted and stored safely? When are bank deposits made? When are the service times? All of these things need to be answered by a policy – a document to which any member can be referred for the process of getting things done in the church so that there is a fair treatment of all members.
More importantly, policy should insist on best practices that comply with government regulations and law, as well as minimize the risk the church takes on in their activities and affairs. Complying with the plethora of regulations and laws that churches are subject to can be a full time job that if not done properly cost the church money, bad publicity, and could even shutter the church doors. Worse, if the church is found to be negligent in how it conducts itself and that negligence causes damage to another person, the church could get sued. Policy looks at the needs of the church and the requirements of the law to ensure that needs are met and the law is followed. Policy looks at the activities of the church and the due diligence necessary to minimize the risk of those activities to ensure that activities are carried out in a manner that fulfills the mission of the church and protects it from unnecessary risk. If churches need good governance, good governance is rooted in good policy.
The foundation of church governance is Scripture. The roof and walls of church governance are made up of bylaws, articles, and policies. At Church General Counsel, one of the first things we'll do is take a look at all of these documents and help pastors provide good governance. Learn more here.
Cory and Stephanie Epps have released their first Christmas EP called Love Has Come to Save. Church General Counsel managing attorney Josh Bryant was able to walk them through the process of obtaining copyrights on their work. Cory and Stephanie Epps are phenomenally talented, and they wrote one of those songs that tells the entire story of Christmas in a new and refreshing way. It starts before Christ left the bliss of heaven and goes all the way through His ultimate victory on the cross, interspersed with the praise that this loving gift deserves. Bryant has joked that the song is Dove Award worthy. After you listen, we think you'll see it isn't a joke - Cory and Stephanie Epps have written an amazing song about the Love that's come in Jesus' birth. Their arrangement of other Christmas classics don't disappoint either.
Churches do things like this all the time, and while no musician or pastor should get greedy with what they create, the pastoral process is inherently creative. Whether you are preparing a sermon, creating graphics, or writing a Dove-worthy Christmas song, you should take steps to protect the integrity of your intellectual property. Monetizing your intellectual property is not inherently greedy. It is a means by which God can provide for your family or church, perpetuate His work from a financial standpoint, and otherwise extend the reach and influence of your work. Managing Attorney Josh Bryant has experience in several aspects of intellectual property law, including copyright, trademark, and other areas that generally don't apply to churches. The intellectual property services he offers are all part of the monthly subscription service churches use to retain Josh Bryant or other attorneys through Church General Counsel. Pastors and musicians can get intellectual property and other assistance independent of their churches at www.josh-bryant.com.
Get Cory and Stephanie Epps' new album on iTunes here.
Get Love Has Come to Save on Google Play here.
Mergers and Acquisitions (M&A) are a niche in the law that have special rules, procedures, and requirements. There are lots of reasons why churches would engage in M&A activities - church revitalization, pastorless churches, homeless churches, the economy of scale that a larger church can provide to a smaller congregation in a multi-site model. But in this post, let's take a look at the legal requirements to make it happen, which if followed precisely and thoroughly with the advice of a qualified attorney can help ensure a successful merger or acquisition.
1. Preliminary Negotiations
These discussions center around theological and ministry philosophy alignment. You'll talk about the history, recent pastoral leadership, polity, church health, facilities, and other options of the church to be acquired or merged. You'll brainstorm obstacles to the merger or acquisition, such as theological differences that you've discovered, debt, property, or opinionated and quarrelsome members. You'll discuss generally how decisions will be made in the merged or acquired church, and talk through things like how deacons, members, small group leaders, and the like will be transferred. Even at this stage, you should have an attorney (or attorneys) involved, because from these discussions a legal-ish document needs to be drafted. Although not a legal requirement, prayer should be a part of or precede this process.
2. Letter of Intent
Attorneys will need to draft this non-binding letter or Memorandum of Understanding that outlines the discussions that took place in preliminary negotiations, assuming that the leaders involved agreed that the merger or acquisition should go forward in the process. It is also beneficial to sign confidentiality agreements at this point in the process, as the next phases of the M&A process will involve financial disclosures that should remain confidential. Such agreements help give both parties a sense of security that in the event that God forecloses the transaction, neither will disclose the other party's financial situation.
3. LEgal Due Diligence
This is where attorneys and accountants get more heavily involved in the transaction. At minimum, it is important to have an accountant prepare three documents based on a review of the merged or acquired church's financial books: an income or profit and loss statement, a balance sheet, and a cash flow statement. Depending on the assets involved, a full blown audit may be more advisable. This should involve a review of the foundational documents of both churches to determine the proper procedure of obtaining approval from boards of directors, elders, committees, congregations, and others who must approve the merger. Contracts, deeds, leases, insurance policies, and other legal documents that the merged or acquired church is subject to should be gathered and reviewed by attorneys to determine the ongoing liability of the remaining church after the transaction is complete. This needs to be a very open, full disclosure of all legal and financial obligations and benefits of the church to be merged or acquired. From this process of due diligence, all other aspects of the transaction flow.
4. Final Negotiations
Leaders from both churches should then meet for final negotiations to hammer out the last details of the merger or acquisition based on all that was learned. An attorney must be involved in these negotiations to draft the final merger agreement, also known as a Plan of Merger. The topics to be covered in these final negotiations are covered in step 5 below.
5. Plan of Merger or Acquisition
The result of the legal due diligence and final negotiations is a Plan of Merger. This is a contract that will eventually be filed with the Secretary of State in the state in which the primary office of the remaining church will reside. It will specify each church's representations and warranties that were made in the legal due diligence process. It will specify what each church promises to do. It will set forth the next steps in terms of getting the approval of elders or congregations, depending on the polity of the churches involved. It will set a "closing date" by which time approval must have been obtained in order to move forward (see step 7 below). While this is a binding contract, it does not bind either party to merge, acquire, or be acquired. It only binds each church to proceed in getting approval for the transaction. If one of the churches cannot get that approval, the contract is void. Do not try to draft this on your own - please get an attorney to do it.
6. Church Approval
Once the Plan of Merger is signed by the pastors or leaders of each church, both churches will proceed to seek approval of the deal, depending on the polity of the church. Some churches will seek approval of the congregation by a vote. Some will require the approval of an elder board and the congregation. Some will require the approval of a denominational office at the state, regional, or national level. Some may even require approval of several committees and the church as a whole. This all depends on the articles of incorporation and/or bylaws of each church, as well as the rules in place in your state. Get the counsel of an attorney to determine what votes are required, as in most cases the final Articles of Merger or Acquisition will require specifics as to vote totals and approval processes before the merger or acquisition will stand.
7. Closing Date
Once both churches have obtained the necessary approval to close the deal by the date set in the Plan of Merger or Acquisition, the closing date will come. Although not a legal requirement, by now it is a good idea to have already had a joint service, fellowship, or other event to build relationships and celebrate God's activity in your churches. On this day, property is legally transferred from one church to the other or to the newly merged church. The final documents will be signed that effectuates the merger or acquisition. Once this date passes, all that remains is the official filing of the necessary paperwork to make the transaction a matter of public record.
8. Articles of Merger or Acquisition
The paperwork that must be filed is called Articles of Merger or Articles of Acquisition. This dissolves the appropriate legal entities, creates the appropriate new legal entities, and finalizes the transaction in the eyes of the state government which oversees the formation, merging, acquisition, and termination of legal business entities, including churches and non-profits. The Articles will include the plan your churches put together in step 5 and statements of voting procedures and outcomes obtained in step 6. Once filed, the process is complete and two distinct legal entities have become one.
At first glance, this seems like a burdensome process. In some cases, you'll blow through 2-3 of these steps in one meeting. In other cases where two larger churches merge, it may take more time. However, these are steps necessary to ensure that both sides are fully informed of what they are getting into administratively and financially. It provides a clear process for both churches to obtain the approvals and buy in necessary to ensure that the merger or acquisition is successful. It provides time for prayer and consideration of the Spirit's guidance. With the assistance of an attorney, it provides the certainty that the transaction meets all of the law's requirements, and that God's church comes out of the deal stable and secure.
If Church General Counsel can be of any assistance as your church goes through this process, please contact us!
Halloween is right around the corner, and many churches are active in trying to figure out how to best capitalize on the holiday to get people on their campuses. It can be a great time to provide a family-friendly and not-so-scary alternative to what's roaming the streets. It is also a good time to invite the community to your campus and show the world that Christians aren't that weird after all. Nevertheless, with such activities often comes risk to the church, a topic Managing Attorney Josh Bryant is keenly familiar with.
Are you doing a Halloween Hay Ride? What about Trunk-or-Treat? (One church that we work with routinely has over 2,500 people on campus in a two-hour window for Trunk-or-Treat.) Are you doing a haunted house that depicts hell? All of these things have inherent risks associated with them. Someone could fall off the hayride and break a leg. A child could be kidnapped from your Trunk-or-Treat celebration. A participant in your haunted house could have a heart attack. In each case, your church could be liable.
While this isn't designed to spook you out of doing these spooky events, churches should be aware of the risks and make a calculated decision on whether to attempt to shift the risk back to the participant. There are ways in which this can be done through liability waivers, indemnity agreements, and assumptions of risk. However, these documents must be meticulously drafted in most states before the courts will even consider them.
We have videos in our client only area about liability waivers. Subscribe to Church General Counsel today and get help drafting the first of many liability waivers that Josh Bryant has experience setting up. Your church will not regret this extra level of legal protection. If you want to talk to Josh Bryant before subscribing, use the button on any of the pages of this website to schedule a video conference with him.
My Momma always told me never talk about religion or politics - at least someone's momma told me that. Here we are about to talk about both in one post. The political activity of churches has been in the news a lot this year since President Trump allegedly repealed the Johnson Amendment that prohibited 501(c)(3) tax exempt organizations from politicking from the pulpit. Did you know that isn't exactly true? The President doesn't have the authority to change congressional legislation. By executive order, he changed the way it is to be interpreted by the IRS. As has been proven time and time again over the last several administrations, with the stroke of a pen that interpretation can again be changed. Here are some reasons to have your Church General Counsel review your political activity policy.
- A written policy on employee political activity is wise.
First of all, a written policy on employee political activity is wise. Do you want your staff or your church to support a particular party or candidate from the pulpit? Does such conduct align with the vision and mission of your church? Is it ok for your staff members to run for office? Can church funds be used for political purposes? What about church resources - could they be used on behalf of a political candidate? Is it ok for church staff to use church time to lobby or campaign? These are all questions which your personnel committee, elders, and/or senior pastors need to answer and put in writing so that everyone is aligned with the direction of church leadership.
Secondly, it is important that you have a political activity policy that is flexible and can be changed quickly. Right now, the Executive Order on the Johnson Amendment prohibits the IRS from finding a church guilty of violating the Johnson Amendment if it could not also find a secular institution guilty. How that would play out if litigated is far from certain since churches have a much bigger pulpit (pun intended) than most 501(c)(3) organizations. Nevertheless, this is just an executive order that cannot overturn congressional legislation. As quickly as it was signed by President Trump, it could be revoked by Congress, the courts (if challenged), or a subsequent president. As such, you need the ability to quickly update, disseminate, and educate others on a policy that aligns with the law as it changes. Managing Attorney Josh Bryant stands ready to help your church comply with this law.
Third, churches need to be fully informed of the repercussions of violating IRS regulations for 501(c)(3) tax exempt organizations. If prosecuted, a church could lose its tax exempt status. That means that every donation made to your church is no longer deductible by your donors. It could hurt your annual giving and ultimately shut the doors to your church. Now, we don't want to be alarmists, and to be fair this is something that has not been tested. However, the law clearly states that you could lose your tax exempt status if found guilty of violating this law. Churches are wise to render unto Caesar in this regard.
Finally, your church needs to understand that there is a difference between endorsement of a particular candidate or party and issue advocacy. You can preach on abortion or poverty until you are blue in the face as long as it doesn't appear that you are endorsing a particular candidate or political party. The government can even complicate this though, as the law up until know has allowed the government to infer violation based on a number of factors even when the content of the message appears on its face to be simply issue based and not directed toward any given party or candidate. Josh Bryant has worked with churches on this issue before, and he can help your church ensure compliance with this unusual law.
There are many different best practices that you could engage in to protect your church from this risk. While we don't want to stifle political speech, we do want to make sure your church is protected from undue government interference. Subscribe to Church General Counsel today for more information.
Jesus said, "Let the little children come to me." It is a sad state of affairs that given such a command we have to talk about a policy that protects kids. Nevertheless, year in and year out, the abuse of kids and vulnerable adults is the top reason why churches end up in court. Since churches get sued most frequently on this issue, the question isn't "why have an attorney review our child protection policy?" The question is, "why wouldn't you?" Here are a few good reasons your church needs a child and vulnerable adult protection policy written by an attorney.
- Your church needs a policy that protects children and vulnerable adults from sexual predators.
Let's start with the main reason you need a good child and vulnerable adult protection policy: sexual abuse in the church hurts the cause of Christ, especially when its victim is a child. The church should be a beacon of hope that points to Christ, not the object of criticism because church leaders did not have a good policy in place to protect kids when they know how prevalent sexual abuse in the church has been up until now. Your church must have a robust policy that does everything it can to prevent abuse from ever occurring.
Secondly, you need a policy that aligns with what most liability insurance companies want. Josh Bryant has experience working with insurance companies on obtaining supplemental sexual incident coverage that is not covered by most general liability policies. Insurance companies are in a great position to know how sexual abuse in the church has occurred in the past, and know exactly what kind of policies they want to see before underwriting an insurance policy.
Third, your church needs a policy that perseveres evidence that a defense attorney will want to present to a judge or jury in the event your church is sued after an allegation of sexual misconduct. Unfortunately, churches in which sexual abuse has occurred are more likely to be guilty until proven innocent, and the only things that proves innocence is evidence. You must preserve evidence as best you can, and Josh Bryant has experience in litigation such that he knows what kind of evidence is necessary.
Fourth, your church needs a policy that is as legally defensible as it is operationally manageable. No policy is worth the paper it is written on if the pastors and volunteers responsible for enforcing that policy don't do it. Most pastors and volunteers don't want to be insubordinate to church policy - they simply don't have the time to do much of what a policy requires sometimes. That is why it is important to have an attorney with experience not only in law, but in ministry as well. Josh Bryant can help balance the ministry needs with the legal best practices.
Finally, you need someone to help with your child protection policies like Josh Bryant, who has the experience necessary to get the job done well. When you sign up for our attorney access plan, this is usually one of the first policies that Church General Counsel will review.
It is so important to have a good child protection policy. Members can see more tips on drafting this policy in our members only area, or you can contact us for more information on how we can help you draft a good child and vulnerable adult protection policy.
Church General Counsel Managing Attorney Josh Bryant, J.D., M.Div., authors most of the posts in this section. From time to time, he will post articles from others in the field of church growth, administration, and operations.