Churches, religious ministries, and other nonprofit organizations have unique legal and financial concerns. These organizations are motivated by their mission, rather than profits, and the differences in how they operate are recognized under the law. It is important to understand how business laws apply to churches and nonprofits and what exemptions exist, as well as what their responsibilities are. The business law attorneys at East Coast Trial Lawyers help churches and nonprofits stay compliant without incurring an undue burden.
Our firm provides comprehensive representation for churches, ministries, and nonprofits in the following areas:
- Incorporation
- Governance and Bylaws
- Tax Exemption Application
- 501c Compliance
- Board Governance
- Nonprofit Consulting and Strategic Planning
- Succession Planning
- Asset Protection
- Fundraising and Compliance
- Religious Freedom
- Land Use and Zoning
- Mergers and Acquisitions
- Litigation
- Compensation Study
Churches
In order to be eligible for legal exemptions, a religious entity must meet certain criteria laid out by the Internal Revenue Service (IRS), including possession of:
- A creed and practice of worship with an established history
- A house or houses of worship
- Regularly-held religious services
- An established congregation
- Ordained ministers
- A distinct legal entity
There are some religious organizations that are not considered churches, but the IRS does allow for some flexibility in its designations on a case-by-case basis. Having an experienced lawyer on hand can help make the incorporation process as smooth as possible.
Nonprofits
Nonprofit organizations can include many types of charities, educational or scientific institutions, trade associations, or religious organizations. There are numerous steps to establishing a nonprofit, beginning with choosing a name that accurately describes the organization but is distinct from other entities.
The organization does not have to file articles of incorporation, though incorporating has a number of benefits that they may want to consider.
Nonprofits will also have to establish a governing body (usually a Board of Directors) and bylaws that will control how they operate.
These decisions can be very difficult to navigate, and once they are made, they are difficult to alter. Consulting with an experienced business lawyer can help nonprofits get it right the first time.
Tax-Exemption
Churches and nonprofits that are recognized by the IRS receive tax-exempt status, meaning that they are not required to pay taxes on contributions or other income. Churches also receive a tax-free housing allowance for their ministers. This is a substantial benefit, but it comes with significant responsibility. They must make regular public disclosures of their assets, as well as fulfill their employment tax requirements, and they are prohibited from engaging in political activity. If the organization is a 501(c)(3), their donors will be able to deduct their contributions, which will require proper documentation from the organization.
Although churches are automatically recognized as tax-exempt by the IRS, nonprofits will have to apply for tax-exempt status within 27 months of their incorporation. Missing this deadline has negative consequences for an organization and its supporters, so it is important to ensure that the application is both timely and accurate.
Legal Risks
Mismanagement or a lack of transparency can make churches and nonprofits vulnerable to litigation, either internally or externally. Some potential legal issues faced by churches and nonprofits include:
- Employment litigation, including discrimination or compensation disputes
- Property disputes
- Challenge to tax-exempt status
- Child sex abuse prevention
As numerous scandals have recently come to light, it is essential for churches and nonprofits to have a clear, transparent, and ethical policy on preventing child abuse and dealing with allegations that arise. Organizations should provide comprehensive training to all employees and volunteers to ensure that children are safe and avoid even the appearance of impropriety. If an abuse allegation is made, it must be handled in a way that honors the mission of the organization and protects its interests while not infringing on the victim’s rights.
Virginia Beach Business Law Attorneys Provide Comprehensive, Customized Representation to Churches and Nonprofits
At East Coast Trial Lawyers, we have the knowledge and experience to handle the complex issues facing churches and nonprofits. Our lawyers have a thorough understanding of the laws and regulations surrounding these organizations and are sensitive to their unique needs. With offices conveniently located in Virginia Beach, we provide tailored legal services to all types of organizations throughout Virginia the state, including the areas of Chesapeake, Eastern Shores, Hampton, Newport News, Norfolk, Portsmouth, and Suffolk. Call us today at 757-352-2237 or contact us online to arrange a consultation with a Virginia Beach business lawyer.