10 Legal and Financial Safeguards Every Church Board Should Know

Are We Incorporated? Incorporating makes it easier for churches to do business and protects church leaders if someone sues the church.

Do We Follow Our Bylaws? Church bylaws describe how members and leaders are determined, as well as the leaders’ roles within the church. In a dispute, courts will look to the church’s bylaws to determine who will prevail.

Are We Putting the Ministry’s Interests First? Church board members have a legal responsibility to place the church’s needs ahead of their own. If you receive a personal financial benefit as a result of serving on the church’s board, you could potentially be sued for breaching your fiduciary responsibility to the church.

Are We Protected by Good Samaritan Laws? Good Samaritan laws can help protect people who provide medical assistance in emergency situations. This protection differs from state to state. Ask the church attorney about the law in your specific state.

Do Charitable Immunity Laws Protect Us from Lawsuits? Most states have enacted charitable immunity laws as a way to help protect volunteer workers from being sued in connection with their volunteer service. However, they vary widely by state and don’t offer the broad immunity from litigation that many may think.

How Could Indemnification Provisions in the Bylaws Help Us? If your bylaws don’t include indemnification provisions to protect board members from becoming personally responsible for a board decision, you may wish to draft some. This could prevent board members from having to pay out-of-pocket costs if they’re sued in connection with their ministry work.

Are We Protecting Our Ministry from Loss? Church leaders must be willing to identify the types of losses that can happen and find ways to reduce their frequency and severity. Losses can included injuries, damage to church property, and incidents of child abuse on your premises. Such losses can not only cost the church financially, but can damage its reputation as well.

Do We Comply with Tax-Exempt Requirements? Churches enjoy a special tax-exempt status that allows donors to claim contributions as tax deductions, but this special status comes with strings attached. Check with an attorney and/or certified public accountant to make sure you’re meeting all state and federal requirements.

Are We Properly Reporting any Unrelated Business Income to the IRS? Tax-Exempt originations must pay income tax on revenue that the IRS considers unrelated business income. Churches that generate unrelated business income (from coupon books sales, coffee shop, bookstore, etc.) must file Form 990-T with the IRS to report it.

Are We Covered by the Church’s Insurance Policy? You’ll want to make sure your church’s insurance policy provides coverage for your church leaders individually if someone sues the church and names them as defendants. Talk to your insurance agent about what coverage the church policy provides for governing board members.

Insurance Board offers a library of resources to the church, please visit the Insurance Board’s Safety Central website at Church Safety Resources - Insurance Board Safety Central for additional information and resources.