Incorporation of Churches

We receive many questions about the incorporation of churches. Robert Showers, of Simms Showers, LLP has written a helpful article about the ins and outs of incorporation, excerpted below.

Robert Showers, Esq
Simms Showers, LLP
305 Harrison St. SE Third Floor
Leesburg, VA 20175
703.771.4671
hrshowers@simmsshowerslaw.com

What are the benefits of incorporation?

1. Incorporation will substantially limit liability of the Pastor(s), Board and members, providing a sure liability shield, provided the church board is not ‘grossly negligent.’
2. Under the new law which became effective July 1, 2005, Section 57-8 trustees are no longer needed for church corporations and court appointment of such trustees is not required to hold, manage, buy, sell, transfer or encumber real property of the church corporation. Of course, church corporations may still authorize trustees to have that legal authority with the church members’ approval or it can delegate it to one or more of its officers or directors. Unincorporated churches, however, must comply with all the old law provisions requiring court approvals for appointment of Trustees and buying, selling, encumbering or transferring land to another entity (other than the new church corporation).
3. Under Section 57-10, real or personal property for church corporations no longer need to be held by trustees but can be held in the name of the church corporation or a separate property holding nonprofit corporation under the new section 57-16.1. If no petition is filed within one year of recordation of the trustee’s deed transferring property, it shall be conclusively presumed that the transfer was valid.
4. Incorporation often makes it easier for a church to buy, sell, and encumber real estate, operate bank accounts and engage in other business transactions.
5. Incorporation protects the corporate name in Virginia and eases trade name registration and trade marking the name where appropriate.
6. Incorporation also lends to stability of an organization more so than an unincorporated association, since the members, directors, trustees, and officers of a church change over the years.
7. Churches must be incorporated to receive grants through government faith-based social service provider programs or private foundations.
8. Incorporation and tax exemption can often permit special nonprofit mailing rates and procure discounts from vendors.
9. Finally, some banks and lending institutions prefer to deal with an incorporated entity to assure its governance, purpose and legal status.

Excerpted from Incorporation of Churches in Virginia: A New Day and Law.