Occasionally, leaders decide there is a need to form a new auxiliary or affiliate to the church. The new institution may be created for various purposes.
In some instances, a new institution is launched to serve as an extension of the ministry. In other circumstances, the church seeks to pursue business opportunities to support its charitable works.
When it is decided that a separate corporation is desired, the church should go about starting the entity in an orderly way. This is important to establish independence and control risks. Here are some necessary steps for forming a new corporation.
Church leaders should be very clear about the stated objective. Church management should have specific goals it seeks to attain with the new organization. Having clear intentions in the beginning will help determine important strategic decisions.
Once leadership knows what it wants to achieve, the work begins with choosing Incorporators to represent the new corporation until it receives its official documents. The incorporators are the persons who apply for the Articles of Incorporation from the North Carolina Secretary of State.
The incorporators should decide on a name for the new corporation. The name should be one that does not infringe on the intellectual property rights of other companies. The incorporators can conduct a name search at the NC Secretary of State site to make sure the name is available.
The application for the Articles requires deciding who will be the Registered Agent. This person is the point of contact to receive official documents for the corporation. The Registered Agent must be 18 years old or older and have a North Carolina address.
After receiving the Articles, the incorporators should approve the initial bylaws and elect the first Board of Directors. The bylaws will describe the purpose of the corporation, the rules of governance, and authority of the officers.
The board of directors has some important decisions to make in the beginning. It should direct that an application be made with the Internal Revenue Service for an Employer Identification Number, EIN. This number is akin to the corporation’s social security number. This number will be needed for many purposes, regardless of whether the corporation has employees.
The corporation may need a State Tax Identification number issued by NC. If the company plans to hire employees in the state, selling taxable goods and services, or may owe excise taxes, the board will want to apply for this Number.
The board of directors should open a separate financial institution account. It is important to avoid commingling funds with the church. The board should appoint a person to manage the financial affairs.
If the corporation is a nonprofit, it may wish to apply for recognition as a 501(c)(3) organization. This application is made with the Internal Revenue Service. This can be a rather demanding process, so the board should choose a qualified person to do this.
If the new corporation will be seeking charitable donations, the board should apply for a Charitable Solicitation License from the NC Secretary of State. It is unlawful to seek donations in NC without a license. The new organization will need to focus on how it will be represented to the public. This may involve the creation of a website, letterhead, email account, and marketing materials. Protecting the organization’s brand may lead to seeking a Trademark or Service Mark to ward off imposters.
The board should decide if it needs certain insurance coverages for the organization and its officers. Types of insurance includes a Fidelity Bond to protect the institution from the bad acts of its insiders. Liability insurance protects the officers from the risks of their decisions. Property insurance protects the physical assets. Other special insurance may be necessary depending on the circumstances.
All along, the board should have been talking about the Strategic Direction of the organization. Strategy involves setting benchmarks and aligning resources to accomplish its aims. This discussion includes putting policies in place to guide future decisions. Effective corporate governance habits must be practiced.
These are a few of the tasks necessary to get a new organization off the ground. It will be up to church leaders to set the foundation for helping the endeavor be a big success.