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Legal Issues Checklist

  1. INCORPORATION
    • Discuss the importance of incorporation issue with key leaders (church becomes a separate legal entity, providing protection for members and ministries)
    • Secure congregational vote to incorporate following the current existing Bylaws with proper publicity
    • Contact the Secretary of State for incorporation materials - Corporate Business Section: (800.256.3494) or www.sos.state.ms.us.
    • Designate the person who will serve as Registered Agent, elect officers of the Corporation and clarify the Articles of Incorporation
    • Adopt Constitution for the new corporation (explains purposes, relationships and doctrinal beliefs of the church)
    • Adopt Bylaws for the new corporation (do not have to be filed with the Secretary of State)
    • Transfer all assets, property, contracts, debts, obligations, etc., to the new corporation
    • Guide the church to be consistent with its new status in all decisions
    • Inform church leaders that charitable organizations such as churches could be held vicariously liable for the acts of their agents (common law charitable immunity no longer exists for not-for-profit entities)
    • Hold an annual incorporation meeting and report changes of the Registered Agent to the Secretary of State’s office.
  2. CONSTITUTION & BYLAWS
    • Adopt Constitution & Bylaws for the newly incorporated church and not-for-profit religious organizations
    • Adopt Constitution & Bylaws for an unincorporated church (all churches need this legal structure for the guidance of its members and ministries)
    • Keep current the Bylaws to inform and guide the church in ministry and business decisions
    • Provide copy for all members, especially new members; insert copy in individual Deacon Ministry Manual
    • Elect annually a permanent (standing) Constitution – Bylaws – Policies Committee
  3. LIABILITY INSURANCE
    • Obtain liability coverage for the ministry protection of property, assets and personnel
    • Obtain minister malpractice insurance for staff member(s)
    • Encourage members to “minister” and refer individuals to licensed experts for “counseling”
    • Stress and teach the confidentiality of communication and records
    • Inform members of the church’s vicarious liability with employees and volunteers
  4. POLICIES, PROCEDURES and RESOLUTIONS
    • Keep current and comply with church-approved policies and procedures for proper guidance and protection
    • Compile a Legal Structure/Administrative Manual (Constitution, Bylaws, Policies, Procedures, Resolutions, etc.)
    • Implement policies and procedures consistent with the church’s purpose and operation
    • Maintain an effective record keeping system to guide and protect the church
  5. PERSONNEL ISSUES
    • Secure completed I-9 and W-4 forms on all employees at the time of employment
    • Secure Federal Employer Identification Number (EIN) from the IRS (Form SS-4)
    • Provide W-2 for all employees (both ordained and non-ordained)
    • Withhold income, FICA and Medicare taxes from compensation of non-ordained employees
    • Report all new hires to DHS of State of MS (800.222.8000)
    • Comply with Social Security laws for ordained ministers (considered self-employed for Social Security by the IRS)
    • Apply “backup withholding” (28%) to independent contractors who fail to supply a Social Security number
    • Provide 1099-MISC to self-employed persons (evangelists, teachers, interims, etc.) who receive more than $600 annually
    • Keep confidential personnel file on each employee, determining what leaders will have access to these files
    • Employ and terminate employees according to church Bylaws and state/federal laws
    • Adopt and keep current a Personnel Handbook, which is comprehensive fof all church personnel policies
    • Adopt reference policy for former employees and determine which church leader(s) will answer such requests
    • Develop prudent system to hire proper personnel, reduce liability risks and enhance the church’s ministry
    • Employ persons based on “Employment At Will” doctrine, not on a contractual basis
    • File Form 941 each quarter (reports number of employees, amount of FICA and FIT (income tax) withheld)
    • Caution ministers to weigh carefully the aspects and ramifications of exemption from Social Security (several stringent requirements must be met before the IRS approves exemption)
  6. FINANCES
    • Secure copies of Church Financial Guidebook (formerly Church Treasurer’s Role) from MBCB Stewardship Department for all church financial leaders (free item)
    • Adopt financial policies and guidelines that protect the church’s ministry, witness and leadership
    • Follow current financial policies, amending when necessary, following the church-approved Bylaws and procedures
    • Provide written substantiation to church members of each gift of $250 or more (effective January 1, 1994)
    • Provide written disclosure of “Quid Pro Quo” contributions of more than $75
    • Provide written substantiation for contributions of noncash property (stringent rules apply)
  7. WEEKDAY and CHILD CARE MINISTRY
    • Provide information and guidance on these issues to the church by approved committee(s) and leaders
    • Understand and comply with state/federal laws pertaining to child care
    • Examine all issues, opportunities and questions pertinent to this ministry
    • Conduct Criminal Background Check and Sex Offense Criminal History on all current and prospective employees (a person’s written permission must be obtained)
    • Obtain a current set of “Regulations Governing Licensure of Child Care Facilities” from the Child Care Licensure Office of Mississippi Department of Health (601.576.7613)
  8. LIABILITY ISSUES
    • Require continuing education for church leaders concerning legal & liability issues, especially off-site issues
    • Eliminate and forbid dangerous/hazardous activities by church leaders and groups, on and off the property
    • Hold accountable and discipline church leaders who disregard personal safety and place persons at risk
    • Consult insurance, law enforcement, legal, tax and medical professionals to adopt safe guidelines in all ministries
    • Report suspected child abuse/neglect - applies to all church leaders (MS Code of 1972 Annotated 43-21-105)
    • Have procedures to properly respond to allegations, violations, negligence, disasters, public relations/media
    • Develop prudent rules for all contact with and supervision of all minors (i.e. two adult rule, etc.)
    • Observe all copyright laws involving literature, music, pictures, technology, media and sound recordings
    • Comply with federal laws prohibiting involvement in political activities that conflict with the 501(c)(3) status
    • Obtain What The Church Can and Cannot Do (guide for political activity - Christian Action Commission)
    • Require annual continuing education on legal issues of pastor, staff and key leaders
    • Develop sexual harassment/misconduct policies for church leaders and agents
    • Caution church staff and members about seriousness of defamation (libel and slander)
    • Develop child abuse prevention policy checklist that is comprehensive and pro-active
    • Provide indemnification for decision makers of the church in connection with lawsuits
    • Develop church office technology and internet policies
  9. TRANSPORTATION
    • Require driver safety training for all prospective and current van/bus drivers
    • Comply with state and federal laws concerning commercial van/bus driver’s license and drug-alcohol testing
    • Adopt a Driver Policies Checklist for all church activities, whether using church vehicles or privately-owned vehicles
    • Inspect and maintain all church-owned vehicles to ensure proper function and safety for all occasions
    • Check with vehicle insurance company periodically on aspects of safety and liability
  10. FACILITIES, GROUNDS and MAINTENANCE
    • Conduct periodic check of facilities, grounds and equipment to ensure safety and reduce risks
    • Require proper inventory and maintenance of church-owned property and equipment
    • Train employees in the use and maintenance of church-owned facilities and equipment
    • Exercise reasonable care with the use, rental and loan of church property and equipment to non-church groups
  11. CRIMINAL BACKGROUND CHECK and SEX OFFENSE CRIMINAL HISTORY
    • Require background check for all present and prospective employees, especially workers with minors
    • Contact local Law enforcement or MS Sex Offender Registry for more information
    • Contact the local DHS office for the State of Mississippi or your local Sheriff’s office or Web sites: www.churchstaffing.com, www.infocheckusa.com, or www.usapeoplesearch.com
  12. MINISTER’S TAXES and FINANCIAL SUPPORT
    • Provide W-2 for all church employees, including all ordained and non-ordained
    • Comply with Social Security laws for ordained ministers (considered self-employed for Social Security by IRS)
    • Structure salary and benefits to reflect federal law and proper guidelines for the best support to the ministers
    • Include non-taxable benefits (life, medical, disability, accident insurance, retirement, etc.) in financial support
    • Determine clearly which employees are clergy and which are non-clergy
    • Reimburse ministers for ministry-related expenses (auto mileage, meals, convention expense, other expenses)
    • Provide housing allowance for ordained ministers (applies to both church-owned and private residences)
    • Have the Personnel Committee to periodically review the church personnel policies and procedures
    • Have the Personnel Committee to annually review the church’s medical, life and disability insurance policies
    • Set up an Annual Employee Performance Review and clarify the process with the church membership, staff and Personnel Committee
  13. EMPLOYMENT LAWS (variously apply to churches depending on size and situation)
    • Civil Rights Act of 1964
    • Age Discrimination in Employment Act (ADEA)
    • American With Disabilities Act (ADA)
    • Fair Labor Standards Act (FLSA)
    • Family and Medical Leave Act of 1993
    • Mississippi Workers’ Compensation Act
    • Occupational Safety and Health Act (OSHA)
    • National Labor Relations Act (NLRA)
    • Workers’ Compensation Insurance (not required by state law, but recommended for most churches)
    • Immigration Reform and Control Act of 1986 (requires each church to complete Form I-9 for all new employees)
  14. DECISION-MAKING IN THE CHURCH
    • Follow Bylaws and church-approved procedures in all decision-making processes and business meetings
    • Warn church members about assuming contractual obligations for the church (issue of legal signatures on documents and contracts)
    • Determine proper limits and duties of pastor, staff, treasurer, clerk, deacons, and other leaders’ authority in daily operations and church decisions
    • Adopt specific provisions governing the decision-making process for the church and its leaders
    • Teach the church family the decision-making process (Bylaws and recommendations)
    • Adopt and maintain effective record-keeping system (organization and central location)
  15. PROPERTY ACQUISITION and FINANCING
    • Exercise prudent care and diligence in the acquisition of all real property (surveys, legal descriptions, title searches, inspections, etc.)
    • Apply the VADA rule to any land purchase (Visible, Accessible, Developable and Affordable)
    • Determine the benefits, risks, costs and obligations of acceptance of gifts of real property
    • Consult with local zoning boards on restrictions and permitted uses of any property
  16. MISSION CHURCH RELATIONS
    • Decide the purpose, legal relationship and obligation of the sponsoring church to the mission
    • Determine any unique provisions of the relationship and obligations of the two entities (church and mission)
    • Understand restrictions, reversion clauses, and donor intentions of property when beginning any new work
    • Conduct legal severance of the relationships when the mission is self-sustaining or the work is discontinued

RESOURCES

Legal Issues Checklist is intended to provide current and accurate information, but not displace proper legal and professional counsel. Church leaders must recognize the many scriptural, legal, moral and ethical obligations incumbent on their congregations. For legal counsel and advice, contact an attorney or professional in the particular area of concern. For more information on the services provided by the Mississippi Baptist Convention Board, contact Robin Nichols (MBCB Financial Services/GuideStone Representative), Alan Woodward (Pastor/Leadership Development Department), and Jimmy Porter (Christian Action Commission). *This document may be reproduced.

September 2009 (with August 2010 corrections)