Help Me Start a Church and Put Everything at Risk?

By Raul Rivera

How would you respond if the Lord connected you to a wonderful pastor you admired who was starting a new church, and that pastor asked you, "Will you help me start this new church and put everything you own at risk?" Would you say "Yes" without any hesitation, or would you inquire as to why everything you owned would have to be put at risk? In essence, that is what a pastor is asking if he starts a church and chooses not to incorporate it. This is a common problem in churches and has been the cause of numerous individuals being held liable for the torts of many churches. When a church does not incorporate, state laws and courts view those churches as an aggregate of individuals joined together under a common name. The risk is greatest if one is part of a voting membership churchs.  Let me give you some life examples of how the law is applied.

How the law is applied

The South Carolina Court of Appeals ruled that where a judgment is obtained against an unincorporated association, "any property of the association and the individual property of any member thereof shall be liable for satisfaction of any such judgment." The court stated that South Carolina law (Section 15-5-160) "permits a direct action against an unincorporated association in the name of the association."  However, no statute separates an unincorporated association, particularly a church group, from an existence separate from that of its members. (Crocker v. Barr 295 S.C. 195 (1988).

In New York, it is similar. State law requires someone who sues a church (that has not been incorporated) to take action against the president or treasurer. In a court case in New York (Martin v. Curran, 303 N.Y. 276), the court held that, "At common law, the association was perceived not as an entity, but as an aggregate of individuals joined together under a common name to serve various civic, social and charitable purposes."

In Maryland, state law allows unincorporated churches to sue and be sued in its name, but it explicitly allows the members and officers to be sued for something the church does in the course of business. In Kimberly Pinsky V. Pikesville Recreation Council, the court was asked to consider "whether the individual officers and directors of Pikesville Recreation Council, an unincorporated association, could be held personally liable for the association's breach of contract." The court held that, "Indeed, in the realm of tort law, individual officers and decision-making members can be held liable for torts committed within or by an unincorporated association."

In Texas, many churches organize under a common name and operate with a federal tax-ID number, but they never officially file to be recognized by the state as an unincorporated association. When this happens, the courts have held that they are not officially an organization and that they are an aggregate of individuals joined together under a common name. Therefore, the torts of the church become the torts of the members. Now, it is important to know that Texas passed the Business Organizations Code, Title 6, Chapter 252. It allows churches to form as associations without incorporating and to be a separate entity from its members. Be that as it may, the paperwork and the process involved make it easier and more beneficial to just incorporate because the requirements to form one are nearly the same as incorporating with additional subsequent filings. Section 252.005 requires an unincorporated association to file a "Statement of Authority" and pay a fee, every time it purchases, sells, or transfers property in its name. Moreover, Sec. 252.011 requires the church to file a statement appointing an agent for service of process.

The greatest risk lies in voting membership churches

In the vast majority of states, unincorporated churches are viewed under common law not as legal entities but rather as an aggregate of individuals doing business in their own personal names. This poses a problem for the individual members of a church, especially if it is a voting membership church. Courts view voting membership churches as a group of individuals who have close control of the association.

What is the answer?

The one simple way a church can avoid the problems listed above is to take advantage of the laws of the land that were put in place to offer protection. There are some that teach against the incorporation of churches because they believe it subordinates the church (God's people) to the state. If that were true, then we as individual citizens would be in error, since we are under the authority of the state to obey the laws of the land. Yet, we know that Scripture teaches us to obey the laws of the land. A proper understanding of what it means to incorporate a church reveals that there is a difference between the church, which is made up of God's people, and the structure we use to conduct business. A corporation is an artificial entity we form in order to conduct the financial affairs of the church. State law allows the church corporation to form bylaws to govern its affairs in a manner that is consistent with the church's doctrines. 

Closing

While most churches today choose wisely to incorporate, a number of churches have been in operation for some time and have yet to make that decision. In light of today's hostile legislative culture and litigious society, the best tactical move your church can make is to incorporate and create a strong set of bylaws that allow the church to operate in a manner that is consistent with its doctrines.