The question of whether to form a nonprofit corporation is one nearly every church or religious organization in the United States must face. While incorporating might be advisable for some churches, it might not be for every church. Know the facts about incorporating before deciding which way you should organize.


It is commonly believed that a church must incorporate as a nonprofit organization in order to receive tax exemptions from the IRS under Section 501(c)3. However, according to the IRS Tax Guide for Churches and Religious Organizations (available for download at the IRS website), churches are not required to incorporate and are automatically tax-exempt, provided that they meet the requirements and the general criteria set forth by the IRS for the definition of a "church." This also applies to other religions who don't call their gatherings "churches." Even so, many churches opt to incorporate anyway, believing the benefits outweigh the disadvantages.


Many businesses and corporations will donate to community charities and humanitarian efforts, but will only recognize registered nonprofit corporations for tax reasons. If your church intends to have a larger outreach in the community and will need funding beyond what your congregation can provide, incorporation might be a desirable option.


When a church incorporates, it adds a measure of legal liability protection for its membership because only the assets of the church corporation can be used to settle debts or lawsuits. Members can't be held liable for the inappropriate actions of another member. In addition, because banks tend to view incorporated churches as more accountable and trustworthy, incorporating can make it easier for a church to get loans.


Nonprofit organizations under Section 501(c)3 can have their tax exemption revoked if they actively support any political candidate. While some might argue whether this can be enforced with unincorporated churches, it certainly can be with incorporated ones. Thus, many church members might view incorporating as a voluntary forfeiting of free speech. In addition, making the church a government-recognized business gives the government more influence in the workings of the church, a fact some consider to be a violation of the separation of church and state.


While choosing to incorporate a church can add some credibility in the public view, and possibly even increase the church's ability to raise money for worthwhile projects, it's also important to realize that an incorporated church gives the government an added measure of control. Incorporation for churches is optional, so when planting a church, weigh this option against your church's long-term goals to see whether what can be gained by incorporating outweighs what might be sacrificed.