How to Decrease the Chance of a Personal Lawsuit Against the Pastor and Board!

Written by Founder Raul Rivera on Apr 21, 2009 in IRS Compliance

We are living in a time and era when lawsuits against churches have increased over 2,000 percent since 1992.   Litigating attorneys have found it convenient to sue churches because most churches operate under a great deal of trust. We all know that the times have changed, and it is prudent to make changes in our church operating procedures to insulate the damage a lawsuit could bring.  Damages that will effect not only our personal lives, but those of the pastor and board of directors as well.  For example, a church in Tennessee conducted an event designed to help young people in the church get better acquainted with persecution against Christians throughout the world.  The vast majority of the church loved the event, however, one young girl and her father did not and filed a lawsuit against the church, the pastor, the deacons and some church members.  In another case, a woman in Michigan sued her church of 12 years because in a church service she responded to the alter call and was "overcome by the Spirit of the Lord."  She fell back and hit her head on the floor. She sued the church claiming the church was negligent and that the pastor committed libel and slander against her.  She was awarded $315,000.00, but later an appeals court reduced it to $40,000.00, awarding negligence only.  She claims that as a result of the fall, she suffers emotional and physical problems.

What can a church do?


There are several things that a church must do to reduce the chances of a court allowing a lawsuit.  Under state law, when a church is incorporated, they are afforded limited personal liability protection, known as indemnification.  However, in order to keep the indemnification, the church has to show that the pastor and board of directors do not act for themselves when church decisions are made, but rather as directors of the church and on behalf of the church.  This is commonly known among legal circles as having a "corporate veil of protection."  When trying to sue a church, litigating attorneys often try to "pierce the corporate veil" by trying to prove that the church did not operate as a corporation, and claim that the church was an "alter ego" of the pastor and board.  The term alter ego means a second self.  In court, the litigating attorney attempts to convince the court that the church, though incorporated, was a second self of the pastor and board of directors; meaning they acted for themselves and not necessarily for the church.  So!  How does a church reduce or eliminate a lawsuit from bleeding all over the pastor and board of directors?  Below are recommendations on how to do it.

  1. Incorporate your church:  When you incorporate the church, you create a separate legal entity from yourself.  However, you need to know that there are annual maintenance requirements that need to be kept.  Each state has their own set of guidelines.  Make sure that you file your annual report and that the state fees are paid.  Many states have adopted the model nonprofit corporation acts, which require that the corporate records of the church be kept at the registered office of the church.
  2. Keep excellent corporate records:  corporate records can sink or save a church in a court case.  In case of an audit, the IRS will spend the majority of its time in your corporate records.  In the same way, if a litigating attorney tries to pierce the corporate veil, the majority of the time will be spent reviewing corporate records.  Your corporate records need to be well kept.  They need to contain the minutes of every board meeting, resolutions of the board, state approved articles of incorporation, board approved bylaws, 501(c)(3) approval, sales tax exemption and more.  In essence, every medium to high level decision of the church needs to be board approved and recorded in the minutes.
  3. Use a church corporate seal when signing legal documents:  Anytime that you sign a legal document of the church, please be sure that you place the church's corporate seal over your signature or, at the very least, on the signature page.  Also, be sure that every time you sign, also state your title.  For example, I would sign "Raul Rivera, As president of ABC Church, Inc."  If you do not have a corporate seal or a corporate records kit, you may want to consider ours.  The kit is designed to keep years worth of corporate records, as well as to store the stainless steel corporate seal which improves your church's corporate information, indicating that you are signing as an officer and not in  your own personal capacity.

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


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