What Kinds of Legal Mistakes Can Ruin Churches in Just One Day?
Oct 26, 2025Churches can help people find hope, faith, and a sense of community. But underlying their sacred mission lurks a complicated legal system full of traps that might quickly end even the most successful ministries if they don't handle them effectively. Churches have a lot of serious legal problems, like problems with hiring people and governing the church.
To keep your ministry's mission, reputation, and long-term success, you need to know what legal blunders can ruin churches overnight and how to avoid them. This full handbook is about the most common legal mistakes churches make. It gives real-life examples of these problems and a plan on how to avoid and fix them.
Working with a professional lawyer is an important part of good risk management. Tier 3: THE PASTOR SUPPORT PLAN, run by Regan VanSteenis, delivers churches the best legal audits, compliance advice, and crisis management services. This gives congregations the knowledge and confidence they need to operate their ministry.
The Special Legal Status of Churches
Churches are 501(c)(3) organizations, which means they have to deal with different legal and tax issues than other kinds of nonprofits.
- A lot of volunteers: Issues that arise when you don't follow the rules and have unpaid labor.
- Changing rules: It's getting difficult to follow the rules.
- Spiritual and community sensitivity are legal choices that have an effect on people's religion and trust.
This part looks at these items in a fresh approach to see how they change the legal danger that churches confront.
Major Legal Errors That Could Destroy Churches in a Single Day
- Rules for running a firm that are out of date or not very good. It's harder to hold people accountable when regulations, board minutes, and lines of authority aren't kept up to date. For example, the IRS investigated a church that lost its tax-exempt status because it didn't keep good records of its meetings.
- Not giving the pastor and staff enough money. The IRS could fine or sue you if you don't use housing allowances legally, draft contracts correctly, or categorize employees correctly. The IRS charged a lot of money to audit a mid-sized church because it didn't handle pastor benefits well for tax purposes.
- Not worrying about the safety of children or background checks for volunteers. Churches could be sued for abuse and have trouble with the media if they don't undertake background checks and follow safety rules. For example, a church had to pay millions of dollars in abuse allegations because they didn't look into the background of a volunteer.
- Not knowing who owns the land and the title. Not knowing who owns and rents property could lead to expensive legal fights or the loss of buildings. A former pastor took over a church facility since the paperwork about who owned it was unclear.
- Problems with intellectual property. If you don't protect your copyrights, trademarks, or usage rights, anyone can take your sermons, logos, and other media and use them without your permission. For example, someone stole a church's branded items online, which made them less special.
- Not following the IRS's rules and requirements for reporting. If you don't file the right papers or disclose unrelated business income correctly, you could lose your tax-exempt status and have to pay fines. The IRS took away a church's tax-exempt status because it didn't keep track of how much money it made from its business. This caused donors to lose faith in the group.
- No job or volunteer deals. People can claim wrongful termination if there aren't any written contracts or clear job descriptions. This can make things inside the company exceedingly confusing. For example, a church lost a case for firing someone without reason because they made commitments over the phone but didn't write them down.
- Not following the rules for harassment and discrimination. When there aren't clear rules and training, it costs a lot of money to file EEOC complaints and causes problems for the public. A church paid out a harassment lawsuit that became public, which hurt its reputation and finances.
- Insurance coverage that isn't enough or doesn't match. Churches could get big fines if they don't have important insurance like EPLI, D&O, or cyber liability. A cyberattack caused a lot of data loss and revealed things that insurance didn't cover.
- Bad handling of disputes and emergencies. Small difficulties can turn into big ones if people aren't prepared for emergencies or don't know what to do when they need legal help. The church's sluggish response to a public issue made the news worse and cost them donors.
How to Build a Fortress to Protect Oneself from Legal Risks Before They Happen
- Creating a culture of awareness and following the rules.
- Adding legal risk management to the ministry's day-to-day work.
- Putting training, paperwork, and open government at the top.
- Leaders set the mood for the gathering.
This guide is not legal advice; it's only for your information. Churches should use lawyers who are certified to give them specific advice.
In Short
There are a lot of legal problems that churches have to deal with, and if they don't pay attention, they could lose their ministry straight away. To protect your purpose and ministry, you need to be knowledgeable, ready, and work with experts. This is especially true for Tier 3: THE PASTOR SUPPORT PLAN. Regan VanSteenis can help churches develop strong legal structures that will help them grow over time and have a spiritual effect.
Links Inside
- Report on the Church's Legal Audit and Compliance
- A Look at the Pastor Support Plan
- Help with the law for running a church
