How to Prepare Bylaws for a Church-Non-Profit

By Elizabeth Rayne

For many religious nonprofits, drafting bylaws is one of the steps involved in officially forming the organization. However, the IRS may recognize a church as an exempt nonprofit even if the church is not incorporated and does not have bylaws. If you choose to incorporate your church at the state level, the laws of the state may require the organization to draft bylaws. Just like any other type of nonprofit, churches must follow the laws of the state throughout the incorporation process.

IRS and Religious Nonprofits

The Internal Revenue Services automatically recognizes certain churches as tax-exempt nonprofits, meaning that the church does not have to pay federal income tax and donations to the church are tax-deductible for the donor. In order to be considered a tax-exempt nonprofit by the IRS, the church must be organized for a religious or charitable purpose, which may be reflected in the organization's bylaws. The income of the church must be used to promote its religious and charitable purposes and not for the benefit of any individual member of the church, apart from reasonable compensation for work performed. Additionally, the IRS bans exempt churches from participating in political activity, such as lobbying or intervening in political campaigns. However, the IRS may recognize a church as exempt even if it is unincorporated and does not have bylaws.

State Incorporation

Churches have the option to incorporate at the state level. The specific steps for incorporation will vary depending on the state where the church is located. Generally, churches decide to incorporate because it limits the liability of individual members of the church. Without incorporation, if the church goes into debt or is successfully sued, the assets of individual members may be used to pay off the church's debt. The laws of the state may have certain requirements for incorporated businesses, such as requiring a board of directors or bylaws.

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Bylaws Overview

Many churches draft bylaws for the organization, either by choice or because state law requires it. Bylaws set the internal rules for how the church will be governed. The provisions may serve to resolve conflicts that may come up between the members and also may provide some form of consistency if the church is taken over by a new group of people. Bylaws must be in compliance with state law where the church is located. For example, state law may require the appointment of a president or secretary; thus, the bylaws would include a provision detailing the process for appointing individuals to such positions.

Bylaws Provisions

Often the bylaws of a church will combine the legal requirements of the state's corporate law with religious doctrine, with the ultimate goal of representing the beliefs and structure of the organization. For example, many church bylaws contain a statement of the church's purpose and doctrine or statement of faith. In accordance with state law, bylaws often contain provisions addressing the minimum and maximum number of board members and the method for adding or removing members. Some churches also include provisions regarding whether or not the church may limit employment opportunities within the church to those who share the same beliefs, if permitted by state law.

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Requirements to Maintain 501C3 Status

More than 100 501(c)(3) organizations lose their exempt status every year, according to the Nonprofit Risk Management Center. The Internal Revenue Code section 501(c)(3) is a provision in the federal tax code, which allows certain nonprofit organizations, including charities, churches, educational institutions and other organizations that meet the requirements to be exempt from certain taxes. The IRS regulates and regularly reviews exempt organizations to ensure that they are following the regulations and that the organization continues to do the work that led to its exempt status. Failing to follow the guidelines can lead to fines and, in some cases, the loss of 501(c)(3) status.

What Is a 501C Non Profit?

Many nonprofit organizations pursue 501(c), or exempt, status from the Internal Revenue Service for tax benefits, and in some cases, to increase donations to the nonprofit. While there are 28 different types of exempt organizations, among the most common include 501(c)(3), 501(c)(4), and 501(c)(7) organizations. In most cases, nonprofits are formed under state law, while the IRS independently grants exempt status to qualified organizations.

Non-Profit Bylaws

The bylaws of a non-profit organization guide its directors, officers, and employees on how to conduct themselves and the business of the organization. If the non-profit wants to maintain its tax-exempt standing, these bylaws must be drafted subject to standards established by the tax code and applicable state law. Although bylaws may be amended, it is important that the rules are drafted well to ensure that the non-profit runs smoothly.

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