This Legal Error Has Closed Down Many Ministries
Nov 01, 2025Don't let this legal mistake shut down your ministry like it has for dozens of others.
The Terrible Legal Mistake That Could Ruin Your Ministry
Every church or ministry has a mission that inspires people and a community that is full of life, but they also have to follow the law and run their business well. A major legal blunder that many people don't see or understand has sadly led to the closing of dozens of ministries, the loss of their tax-exempt status, or lawsuits that could ruin them.
At Church Law and Strategy, we've seen firsthand how bad this mistake can be, and we've helped many ministries find it, fix it, and stop it from putting their futures at risk. Our expert legal advice and governance plans help ministries run safely and for a long time.
This guide tells you what this error is, how it happens, what happens because of it, and how to avoid it by working with the correct legal partner.
Finding the Most Important Legal Mistake: Not Keeping Up with Good Corporate Governance
Not keeping up with good corporate governance is the most prevalent legal mistake that leads to ministry shutdowns. This includes having bad bylaws, not having enough board oversight, and not keeping good records.
Why Corporate Governance Is Important
- Gives the law a way to make decisions
- Keeps leaders and the company safe from being sued
- Makes ensuring that state and federal laws are followed
- Being open and honest builds trust with donors and the public.
Why Governance Fails
- Bylaws that are out of date or missing: Many ministries use obsolete, general, or no bylaws that don't reflect contemporary legislation or the way their organizations work.
- Board members not being active: The ministry's legal protection is weaker when boards don't convene often or write down their judgments.
- Bad Record Keeping: Regulators and courts get worried when minutes, financial records, or policy documents are missing.
What Happens When Governance Fails
- Loss of Tax-Exempt Status: The IRS says that churches and NGOs must have good governance, or they could lose their tax-exempt status.
- More legal and financial responsibility: Without good governance, the ministry and its leaders are at risk of being sued and having to pay fines.
- Loss of donor trust and operational breakdown: When governance fails, it can lead to turmoil within the organization and loss of trust among supporters.
How to Avoid Making This Legal Mistake
- Put in place full bylaws: The new bylaws are based on the size, structure, and mission of your ministry.
- Set up and give electricity to an active board: It's really important to have regular meetings, training, and written decisions.
- Keep Detailed Records: Keeping track of all governance and financial acts in a systematic way.
How Church Law and Strategy Show the Way
Our legal audit and compliance reports and church governance attorney services help ministries:
- Make your own rules and ways to run your business
- Teach and help boards with best practices
- Check records and policies to find gaps.
- Give ongoing advice to stay in compliance
Questions That Are Often Asked
- Q: How often should we look over our rules and regulations for running the business? A: At least once every three to five years or after big changes in the organization.
- Q: Is it permissible for a ministry to run without a formal board? A: No. Nonprofits are required by law to have active governance.
- Q: What records do you need to keep the most? A: Minutes from meetings, financial reports, bylaws, and policy papers.
Strong Governance Is the Key to a Bright Future for Your Ministry
This simple but serious legal blunder can ruin ministries. Avoid it by working with Church Law and Strategy, the trusted source for experienced governance advice that keeps your ministry safe and strong.
Links Inside
Links to Other Sites
- National Council of Nonprofits Governance Resources: https://www.councilofnonprofits.org/tools-resources/board-governance
- IRS Governance and Compliance Information: https://www.irs.gov/charities-non-profits/charitable-organizations/governance-and-related-topics
- State Nonprofit Law Summaries: https://www.nonprofitlawblog.com/nonprofit-law-resources/
