Do we need a new organization for the new campus?

How to Understand the Legal Structure for New Church Campuses

When your ministry grows and you think about opening a new campus, you need to ask yourself a very important legal and strategic question: Do you need to set up a new legal entity for this campus, or can it run under the nonprofit structure of your current church?

This choice has an impact on governance, compliance, taxes, risk management, and operational control. Churches with 2,500 to 10,000 members, like those that Church Law and Strategy's Pastor Support Plan helps, need to get this right in order to develop in a way that lasts and keep legal concerns to a minimum.

This blog talks about the most important things that church leaders need to think about when determining whether to create a new organization or run the campus as part of their current church.

What is a legal entity, and why is it important?

A legal entity is a group that the law says has rights and duties. Under state law, churches are usually nonprofit entities that don't have to pay federal taxes because they are 501(c)(3) organizations.

Starting a new campus can mean:

• Running as a branch or location of the nonprofit that already exists
• Making a separate nonprofit corporation with its own articles of incorporation, bylaws, and tax returns

There are different legal and practical effects for each strategy.

The pros and cons of running a business as an existing entity

Pros

• Easy to run and govern
• Unified tax-exempt status and IRS filings
• Fundraising made easier by one group
• Easier to put together finances

Cons

• Liability issues can spread across campuses.
• Difficulties in coordinating governance across many locations
• If a foreign organization has campuses in more than one state, they may need to register with the state and follow certain rules.

The Good and Bad Things About Making a New Entity

Benefits

• Liability protection that keeps risks to the specific campus
• Clear rules for running the campus and its finances
• Operations that are tailored to match local laws and needs

Cons

• More work for the administration: separate board, files, and accounting
• More money spent on following the law, paying taxes, and running a business
• Difficult cooperation between groups

State Registration and Compliance in More Than One State

When churches work in more than one state, they may have to deal with:

• Requirements for registering a foreign nonprofit if campuses are run by the parent company but are in different states
• Separate registrations for state charitable solicitations for fundraising events
• Different state regulations that affect how nonprofits are run and how they report

Church Law and Strategy's church legal counsel services help churches figure out how to meet all of their many compliance requirements.

Things to think about before applying for IRS tax-exempt status

The IRS acknowledges that an entity is tax-exempt under 501(c)(3) based on its governing papers and how it runs. Some important things to think about are:

• Making sure that all activities on all campuses are in line with the exempt purpose
• Avoiding unrelated business revenue that could put tax-exempt status at risk
• Coordinating filings like Form 990 for more than one school or entity

Our church legal audit and compliance report service helps find hazards and suggest steps to take to stay in line with federal rules.

Governance and Board Control

To run more than one campus, whether it's under one organization or several, you need:

• Setting up board duties and ways to keep an eye on them
• Making it clear who is in charge of making decisions about money, staff, and ministry direction at each school
• Keeping up good communication and reporting between the central leadership and the campuses

Church Law and Strategy's church governance attorney services help write and change governance documents to make them work for multi-campus setups.

Controls for Money and Operations

When adding campuses, some important financial controls are:

• Keeping campus budgeting and accounting separate
• Making sure that spending and reporting rules are always the same
• Auditing processes to make sure everything is clear and follows the rules

As part of the Pastor support plan, we offer an overhead efficiency analysis service that makes sure your ministry's resources are used wisely on all campuses.

Managing Risk and Liability

More campuses bring more risks, such as:

• Liability for property and premises
• Legal claims from employees and volunteers
• Violations of compliance

It is also important to put in place liability waivers, insurance checks, and safety rules. Church Law and Strategy's church risk management and liability waivers service helps you get the right protections for your church.

How the Pastor support plan Can Help You Make Decisions About Your Legal Structure

The Pastor Support Plan has:

• Quarterly meetings for executives to talk about growth and the legal structure
• Priority email access for urgent help
• Reports on legal audits and compliance
• Reviews of overhead and insurance
• Programs for pastoral support

This whole range of support gives church leaders the information they need to make smart choices about how to set up new campuses.

Making the choice to set up a new legal entity for your new campus is hard but important since it will determine how your ministry is run, how it follows the law, and how much risk it takes. The Pastor Support Plan from Church Law and Strategy gives you the knowledge, strategic insight, and operational support you need to make these choices with confidence.

Your ministry can grow in a way that protects its mission and assets with custom legal audits, meetings with executives, and full compliance assistance.

This blog article is simply meant to give you information and is not legal advice. You do not become a customer of Church Law and Strategy or its agents by reading this article. If you need legal counsel that is specific to your church or organization, please talk to a professional lawyer.

Links inside

• Church Legal Audit and Compliance Report
• Church Governance Attorney
• Church Risk Management and Liability Waivers

Links to Other Sites

• IRS Nonprofit Compliance Guide: https://www.irs.gov/charities-non-profits
• National Council of Nonprofits: https://www.councilofnonprofits.org/
• State Charity Registration Information: https://www.naag.org/charities/