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  • What are the Most Common Legal Mistakes Made by Church Leaders?

    Churches are legally classified as nonprofit organizations, and they must follow specific business and accounting rules. While many churches may start small, it is not unusual for them to grow into larger organizations. Some even evolve into powerful mega-churches with one or more campuses.

    No matter the size or type of church, there are legal considerations. Every church, synagogue, mosque, or other religious organization should have a trusted attorney as a part of their governing team. While a church may have a nonprofit status, a spiritual entity often operates like a small business or corporation. With so many legal aspects to their operations and their status as a nonprofit organization, a church may find itself facing any number of legal issues. Common legal mistakes that church leaders make are listed below.

    Failure to Understand Legal Responsibilities

    Many people may believe that churches are immune to the law and that there are no financial-related requirements. A church, especially a small church, may think that they do not need to follow many laws, but this is not true. Church leaders need to ensure they are operating and handling finances per nonprofit and Internal Revenue Service (IRS) regulations. Not understanding legal responsibilities is common. A pastor or other church leader may not understand the requirements of being a nonprofit entity, but it is their duty to find out and follow all legalities.

    An attorney is an essential part of a church’s governing team. One of their primary responsibilities is to draft articles of incorporation for the church. Incorporating creates a structure for the church and protects its leaders from back taxes, debts, and other liabilities. In addition, an incorporated church can govern itself by creating bylaws and can buy and sell property, make investments, and sign documents under its own name.

    Church leaders may mistakenly use bylaw templates or create bylaws without legal input. Legal documents are readily available online, but they are rarely appropriate for every circumstance. A church should draft bylaws specific to their congregation and are created with guidance from church leaders and an attorney. Legal review can ensure compliance with personnel, accounting, tax, and other operational requirements and laws.

    Additionally, many church leaders may not comply with employment laws, but this is a mistake. A church may believe that they do not need to follow employment or discrimination laws because they are a small or friendly congregation. However, this is not true.

    Improper Documentation

    Church leaders may not document beliefs and practices in writing, which is an issue. Part of becoming incorporated means recording religious beliefs and practices in writing. Documentation helps the church’s leaders and congregation remain focused on the church’s mission, vision, and principles, and helps make decisions related to church activities. This documentation also helps in making employment decisions.

    Poor Choice of Board Members

    Every church needs a board to serve as objective governors, who will help the church fulfill its spiritual mission, strategically plan, guide policies, ensure compliance, and act as fiduciaries, among other responsibilities. Selecting the right board members is crucial to ensuring lawful operations.

    Not Implementing Background Checks

    Church leaders may fail to do background checks on employees and volunteer, but it is important to always do these checks.A church employee or volunteer should undergo a background check for everyone’s safety. In addition, a church must quickly address any known questionable activity as soon as it happens or is brought to light.

    Unprotected Assets

    A religious organization may decide to invest its money themselves or make other decisions involving its assets, such as buildings, land, or investments. Professionals, such as investment managers, attorneys, and others, should be called in to help protect valuable assets.

    Failure to Understand Business Requirements

    Many church leaders may not understand tax law, zoning ordinances, exemptions, nonprofit status, and other business requirements.Religious entities should not try to handle legal, financial, or accounting practices themselves. Compliance is critical and complex. An attorney should be on board to guide many of the business, tax, and accounting issues a church may encounter.

    Failure to Properly Structure Events

    Fundraising or sponsoring activities, such as trips, community events, and camps, may not be properly handled, but an attorney can help. These activities are not wrong or illegal, but churches should be aware of the responsibilities involved, such as legal requirements as well as insurance.

    Poor Strategic Planning

    Sometimes, churches proliferate or branch out to many different ministries or locations. A church leader may even decide to buy land or construct a new building in response to an immediate need. However, are these quick reactions strategic and part of the church’s long-term plan? Church leaders need to develop and follow a strategic plan that they can review annually. Bylaws should also be reviewed and updated at least every two years or as needed.

    No Evaluations

    Churches can become inward-focused and operate with the status quo. No business or organization can expect to survive without evaluating how they are doing according to the community, the congregation, and others whose needs they fulfill. A church that does not grow and change with the evolving needs of its constituents is bound to fail or lose members.

    Inadequate Insurance

    Managing risk is crucial for any religious entity or organization. From misconduct to negligence to natural disasters, every church needs to be fully insured against liabilities. An attorney can help with insurance needs and requirements.

    Failure to Have an Attorney

    Every church should have an attorney they can trust as part of their team. That does not mean that the attorney must attend every single meeting or be on staff. It means that an attorney who is a trusted advisor should be consulted for all legal issues to help protect the church and its congregation.

    How can an Attorney Help a Church?

    Churches face many issues that can be remedied by legal counsel, including:

    Employee Issues: Hiring, firing, creating a governing board, drafting employee behavior expectations, and other employee-related activities can benefit from legal guidance.

    Documents: Every church should have bylaws and incorporation documents that have been created or vetted by an experienced attorney. This includes protecting intellectual property.

    Contracts: A religious entity should always have legal counsel review any type of contract or other legally binding documents and ensure that employees who handle money are bonded and understand their fiduciary responsibilities.

    Real Estate Holdings: Churches may establish other campuses, face zoning issues, buy land, develop property, and perform other real estate transactions that call for legal expertise.

    Investments: Even though religious organizations are considered nonprofits, that does not mean they do not invest their money. An attorney can help guide these financial transactions legally and help the church protect its assets.

    Tax and Accounting: Having a nonprofit status brings complex tax, financial, and accounting responsibilities. An attorney can ensure compliance with the requirements.

    Crisis Intervention: Religious entities are not immune to crises. From employee behavior to mishandling of funds, any number of concerns can arise that need the intervention of legal counsel.

    Church Law Attorneys at Anchor Legal Group, PLLC Protect Churches Against Common Legal Mistakes

    The church law attorneys at Anchor Legal Group, PLLC help religious organizations of all denominations operate lawfully. If you need an attorney for your church, contact us online or call us at 757-LAW-0000 to set up an initial consultation. Located in Virginia Beach, Virginia, we serve clients throughout Chesapeake, Norfolk, Suffolk, Portsmouth, Newport News, Hampton, and Eastern Shore. We also serve our clients throughout the United States through our network of associated attorneys.