Creating The Ultimate Church Structure, Part 1

By Raul Rivera

Imagine, a guest speaker comes to your church and preaches a message so moving, so compelling that almost the entire congregation responds to the altar call.  In clusters, they crowd the front; some weeping, others with raised hands and others on their knees.  You are seeing real transformation occur in the lives of people as the guest lays hands on many of them.  In an effort to best manage what is happening at the altar and leave room enough for the minister to physically reach all those for whom he is going to pray, your ushers are trying to keep people in some semblance of rows.  Though not perfect, one hour later the service comes to an end and you close.  What a beautiful time.  You are reminded once again why God called you to the ministry.

The good and the bad news

Keep imagining, the days following the service, people testify of the miraculous things God has done in their lives.   Sometime later, word gets back to you that a woman in her thirties who visited the church for the first time was injured when someone fell on her and overextended her knee causing her discomfort.  She claims that ever since the injury she received at church, she has not been able to run for more than a few minutes without feeling extreme pain. Being a long distance runner, she claims that the injury took away from her the love and enjoyment of running.  She files a lawsuit against the church for $3,000,000.00. While it is always encouraging to hear wonderful news, it is always the bad news that creates a bigger emotional impact on leaders.

What does your ministry own?

Now, imagine the plans you have for your church.  You want to purchase land to build your facilities; you have $125,000.00 dollars in cash saved for such purpose.  The church also has a $1,000,000.00 liability insurance policy, two vans, a baby grand piano, and approximately $75,000.00 in personal property such as chairs, tables, computers, sound equipment and instruments.  Sound familiar?  Most churches that have 500 or fewer members fit this description when it comes to their assets.  What have you done to protect those assets?  It is a fact that nearly all churches in America do very little to protect their assets. 

The world's first Christian outreach

In the book of Matthew, chapter 10, we find the first ever commissioning of a Christian outreach.  After anointing the disciples, Jesus gives them a stern warning of what is about to happen, followed by a strategy to overcome.  He says, "Behold, I send you out as sheep in the midst of wolves. Therefore, be wise as serpents and harmless as doves."  He also goes on to warn them that people will use the courts as the primary means of persecution.  It seems to me that churches have all but ignored this stern warning and strategy. 

One thousand churches per month get sued

Because we live in the world's most litigious society, purposeful efforts need to be made to protect the assets that the church acquires over time.  In 2010, over 1,000 churches per month faced a lawsuit.  It comes as no surprise since Jesus warned us that a primary form of persecution would come through the courts.  The real question is what was Jesus really trying to tell us?  After thinking about this for quite some time, I asked myself what it means to be "wise as a serpent?"  I discovered three attributes that are most prominent in a snake.  They are as follows.

1.     A snake is always on guard.

2.     A snake uses its tongue to foresee what lies ahead.

3.     A snake is stealthy in its movement.

We can see that, in essence, the Lord was telling His disciples not to get caught off guard, and to foresee what was coming.  We can also see that just like a snake is stealthy, there are wise moves we can make in this world, as we steward what God has given to us, that will actually help guard us from the attacks of the enemy against the ministry.  One of them is to quietly arrange our ministries in such a way so that words we need to defend our ministries in court would be easy to come by.

Imagine what happens if you are sued

Let's go back to the church scenario we imagined earlier.  Though the church may have a $1,000,000.00 liability insurance policy, the lawsuit filed is for $3,000,000.00.  The insurance company will fight in your behalf for only the first $1,000,000.00.  If the woman who is suing the church prevails, the insurance will pay its portion and the rest of the suit will have to be paid by the church.  The litigating attorney will place liens on anything that the church owns.  So long as the suit has not been paid, the church will never be able to purchase a new building or get financing for any expansion projects.  Is there something churches and ministries can do?  Please keep reading and I will show you how!

How a holdings corporation will help

Congress authorized section 501(c)(2) to allow tax-exempt organizations (such as your church) the ability to take its assets and put them into a holdings corporation that is owned and controlled by the church.  In the IRS's EO CPE text of 1986, the top two reasons for a church to put its assets into a holdings corporation are as follows:

1.     Limitation of liability from potential damage suits, and

2.     Enhancement of ability to borrow.

When a church properly places its assets in a holdings corporation, it heeds the warning that the Lord gave His disciples, and puts into action a "wise-as-a-serpent" strategy to protect its assets. 

The ultimate church structure

Imagine if when you had formed your church you had also formed a holdings corporation. Let's say that the name of your church is Church XYZ and the name of the holdings corporation is Church XYZ Holdings.  All of the assets are placed in the name of the holdings corporation.  Now, the holdings corporation owns everything from the vans and the cash, to the baby grand piano, chairs, tables, computers, sound equipment and instruments.

Setting up your church with a holdings corporation makes your church very unattractive to litigating attorneys because they will not be able to go after your assets.  You see, that is how litigators get paid.  When they realize their clients will likely never pay them (and your church assets will not finance their paycheck), they will not want to represent them. 

Now that all of your church's assets are in the name of the holdings corporation, let's review what follows after that service where the guest speaker preached a message that changed many lives.  You get news that a lady in her thirties suffered a knee injury during the altar call.  The church reaches out to her but she is unwilling to talk to the church.  So, you review what the church could have done (and will now need to do) to prevent similar incidents in the future, you create a new altar ministry policy, and you never hear from her attorney, thanks to the way you have strategically set up your church.

How we can help

It is my recommendation for churches that currently have assets or plan on acquiring assets in the next 24 months to set up their holdings corporations as part of their legal foundation.  Making wise moves for your church today ensures stability for tomorrow. If you have any questions about establishing the perfect church set up, please call Nathan Camp at 770638-3444 for more information.

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