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  • Administrative Guide

    • Administrative Guide

    Sep 5, 2020

    The purpose of this guide is to help Crossway church leaders and church plant teams understand the key administration and corporate items that need to be in place for their church entity.  While this guide is by no means exhaustive, it will thoroughly cover the essentials of ministry organization in detail. A church plant team or sending church will benefit most by having an administratively gifted team member who helps track the process and carries it forward. 

    Please Read Disclaimer

    The content in the Administrative Guide is meant for assistance among Crossway Network Churches and does not reflect professional legal expertise. We recommend that every church obtain legal assistance and we include those recommendations within the guide where applicable. While we love the universal church and would be willing to interact on the content here with others, we are only able to directly support admin processes for churches and leaders within the Network family. In those cases, Crossway’s Executive Admin Team is ready to assist as new churches are planted. Please email admin@crosswaynetwork.org.

    Section A: Church Formation and Incorporation

    Click each heading to expand the topics in order below.

    INTRODUCTION

    The Administrative Guide provides a checklist followed by detailed instructions and resources for putting each of these key areas of organization in place.  Some of these items will be immediately necessary as a church is planted while others can be put into place as a church grows and requires more layers of organization.  For example, all of the steps in for “Church Formation and Incorporation” are required at the outset of beginning a new work whereas many of your Position Papers and Ministry Policies in a “Ministry Handbook,” will develop over time.  Guidance and recommendations are provided throughout.  

    In addition to being an essential church planting resource, this Administrative Guide is intended to be an ongoing help for our existing churches and established churches adopted into Crossway Network as well. 

    PLEASE NOTE: The Guide is being developed ongoing by a team serving primarily the Colorado Family of Churches.  While most of all of the processes involved will apply to every state, several of the specific examples and resources will reference Colorado directly.  As we gain a broader base of knowledge for other states, we will expand the resources lists accordingly.  Where we are able, we have provided direction and links to resources for every state where Crossway churches are located. If you would like to provide examples and resources for additional states, have additional input and recommendations, or need help walking through various steps included, please contact admin@crosswaynetwork.org 

    STEP 1: FORM A NONPROFIT CORPORATION

    You have been praying and planning for this new church for quite some time already.  Your vision and mission for the church is likely ahead of the legal and logistical details needed to launch the church as an official Non-Profit Corporation. 

    Depending on your state, this may also be referred to as the Corporate Charter or the Certificate of Incorporation. This is state specific so it is important to make sure this is done correctly with your state.  It is also essential that your church plant team follows through with this at the outset.  You will not be able to legally receive and report tax deductible donations until your church is incorporated.

    Following are the essential steps to forming your nonprofit corporation.  While we are providing a summary of the process, the resource links included below will take you through the process in detail.  There are also some recommended organizations that can do all of this more “turnkey” for you if you want to prioritize the funds it will take in your startup costs. Another good option if you are able and have access, is to hire a local attorney who practices nonprofit law to be your Incorporator. Expect legal fees in the range of $500-$1,000.

    SERVICES AND RESOURCES TO ASSIST

    While we recommend that you take time at some of these links to get informed a bit more before diving in, most of the resources will be copied and linked again under the relevant steps below.

    – Create and File Articles of Incorporation

    The Articles of Incorporation define your corporation and the purpose for which you exist.  This is the main corporate document for every nonprofit corporation.  A corporation (in this case your church) becomes a legal entity on the date that its articles are filed with the state corporate filing office. This can usually be found online and is usually the Secretary of State. It is important that all churches, regardless of the number of years in existence, keep up-to-date Articles of Incorporation filed.

    Go to this 50 state guide and scroll down to select your state. Please note that this is not a federal level filing and has nothing to do with the IRS.  

    While the articles may seem tedious and may not seem central to ongoing ministry function, they are legally required for all nonprofit operations you will undertake.  There are a wealth of resources for navigating this process but it is highly recommended that you obtain legal assistance for filing your Articles. You will obviously need to budget for this in your startup costs unless you have a relationship with an attorney who will work pro bono. 

    There is variation among the states for what is required in your articles, but most states require most if not all of the following pieces of information in articles of incorporation:

    • The name of your corporation (Church name)
    • Your corporation’s principal place of business (Likely the church or office address)
    • The name and address of your corporation’s registered agent (Person initiating the formation of the corporation. Likely one of the founding pastors)
    • A statement of the corporation’s purpose.
    • The corporation’s duration (usually perpetual)
    • The number of members (for a nonprofit corporation the bylaws usually simply state “The corporation shall have no members.”) 
    • The names and addresses of the incorporators, or of the initial officers or directors
    • One or more incorporator signatures.

    SERVICES AND RESOURCES TO ASSIST

    Next, or likely at about the same time as you file Articles of Incorporation, you will need to create Church Bylaws.

    – Create Church Bylaws

    While the Articles of Incorporation define who you are and the purpose for which you exist, your Church Bylaws describe how your board of directors (likely your pastor team) operates.  You will not have to write your bylaws from “scratch.”  There are samples and services that will help you get these established. If you do not have an attorney to hire, we have found the the most comprehensive and cost effective path is with a membership with Alliance Defending Freedom (Church Alliance).

    Your church bylaws will need to include:

    • Location of the principal office of the corporation.  Usually your church building or church office. Could be a home address if you don’t have a church building.
    • Members of the corporations.  Your bylaws should state that the corporation has no members.
    • Define the Board of Directors of the corporation. Specific the general powers of the board, the number of members, tenure, and qualifications for being a board member.
    • Outline the Officers and Agents of the corporation.
    • Describes the Indemnification of Certain Persons serving the corporation.
    • Outlines the Provision of Insurance for corporation members.
    • Clearly state all aspects of the Conflict of Interest Policy of the corporation.
    • Miscellaneous items for the corporation are also listed as a final section.
    • The church bylaws should be stored in a safe location with access given to the board.  They do not need to be filed with any external or legal organization. 
    • Church Bylaws should not be copied or taken from samples or templates without the step of professional review.

    Services and Resources to Assist

    Once you create your church bylaws, store them in a safe place, ideally with your articles of incorporation. Again, while the articles have to be stored with your state of incorporation, your bylaws do not. They are internal records to protect you and provide evidence that you are functioning as a church should proof ever be required.

    Next, to function as a business, you will need an Employee Identification number. This is true whether you have employees that will need to be paid or not.

    – Request an Employer Identification Number

    The EIN (or FEIN, Federal Employee Identification Number) for your church serves as an identifier for business tax purposes. Think of it as a Social Security number for your corporation, in this case, your church. You need this number from the IRS (among other things) to pay employees and file the necessary periodic tax documents that you’ll need as a church.

    You will need to decide who will be designated as your “responsible party.” In most cases this will be one of your pastors who is willing to be the registered applicant. See “Understanding Responsible Party” link below. In some cases it can also be an attorney if you are able to work with one (though not required).  Once you have identified your responsible party, obtain an Employer Identification Number (EIN) with the IRS here.

    EIN KEY LINKS

    Once you have created and filed articles of incorporation, recorded the church bylaws, and obtained your EIN, you will have what you need to be recognized officially as a nonprofit business. Next you will need to secure the relevant local and state tax exemptions.

    – If Desired, Obtain a IRS 501(c)(3) Determination Letter

    As you take steps forward, you will notice that most all resources and guidance will refer to churches as nonprofit organizations using the IRS “501(c)(3)” designation.  However, churches are automatically recognized as tax exempt, nonprofit corporations (with 501(c)(3) recognition by the government) as long as they have taken the steps to incorporate and they follow the parameters for existing as a non-profit entity and thus are not required to obtain a Determination Letter from the IRS. Consult the IRS’ helpful Tax Guide for Churches and Religious Organizations for more information. Most Crossway Network churches up until about 2018 have simply focused on their Non-Profit incorporation process and have not seen the need for obtaining a 501(c)(3) letter from the IRS.

    While it is not required, a church may still decide for various reasons to apply for a 501(c)(3) Determination Letter from the IRS. Many churches simply want the added official designation and Determination Letter on file for simplicity and an added layer of credibility. In other unique cases, certain donating organizations may have a contribution policy that requires the recipient (your church) to have a Determination Letter. We are finding that fewer and fewer organizations will extend non-profit benefits (discounted pricing, free services, etc.) to churches if they have not obtained this 501(c)(3) determination letter. We do not see that trend reversing and so now recommend that churches go ahead with getting the letter as a part of their church planting plan.

    Should you decide as a church that you desire to have IRS 501(c)(3) recognition on file, you can apply for a 501(c)(3) Determination Letter with the IRS here. See our one page resource on this topic.

    PLEASE NOTE: As of October, 2021, our understanding is that these applications and others with the IRS are extremely backlogged and could take as long as 9 months to process.

    – Obtain Local/State Sales and Property Tax Exemption

    Churches are often exempt from both sales taxes and property taxes assuming the church has obtained its nonprofit status.

    To be exempt from sales taxes means that the church is not required to pay state collected sales tax for purchases made for their regular charitable functions and activities.

    To be exempt from property taxes means that the church is not required to pay state-collected property tax for any property held in the name of the nonprofit organization (the church). The one exception is for any space the church may rent out for other for-profit use. In that case the church must pay proportional tax on rented or leased space to the state. This amount should be determined ahead of a lease agreement and included in the amount of rent the tenant pays to the church. See this example at Brotherhood Mutual for further understanding as well as their guidance on UBIT (Unrelated Business Income Tax).

    The process for pursuing a certificate of sales tax exemption and property tax exemption will vary from state to state where applicable. See the links below for the States where Crossway Network Churches are located.

    – Sales and Property Tax Exemption State by State
    STEP 2: OBTAIN CHURCH INSURANCE POLICIES

    In today’s legal environment, it is critical that churches obtain proper coverage when forming. While we all hope that we never have a large liability claim or face a lawsuit, it is important to have proper insurance in place so that we don’t risk a church being burdened or forced to close due to not having insurance coverage for a claim. Because coverages are unique to each church, the stage of the church, and the specific local nuances, it is advised that churches work with a local agent to best determine the amount of coverage and the specific policies each church should have in place. We recommend finding 1-3 licensed agents that work specifically with churches to have them provide recommended coverages and quotes. If there are any other Crossway Network churches in the same state, their insurance agents may very well be a helpful resource to you as well. Brotherhood Mutual is a church focused insurance group that has helped several Crossway Network churches and seems to have far reaching service across many states. https://www.brotherhoodmutual.com/

    Due to the nature of ministry changing and growing, it is important that each church review their insurance policy with their agent each year and ensure that they have the proper coverage in place. Additionally, a church should review their policy when there are significant changes, such as purchasing a building, a church van, sending a missions team, and activities such as these that require additional policies. 

    While coverages will look very different from church-to-church given the size, activities, assets and more, here are some recommended coverages for churches to have in place:

    • General Liability 
    • Personal Property
    • Security Team
    • Sexual abuse 
    • Directors & Officers 
    • Non-Owned and Hired Auto
    • Umbrella Policy
    • Workers Compensation 
    • Auto Policy (if there are church owned vehicles)
    • Property Insurance (if the church owns a building)

    Because coverage will be unique to each church, having an agent who understands your church and the risks involved is important to making sure your church has the proper coverage and protection in place.

    STEP 3: SET UP BOOKKEEPING AND PAYROLL

    The nature of managing the generous donations of God’s people and the budget they go toward requires great care and attention.  It is vital that accurate bookkeeping and organized payroll is in place from the very beginning.  There are organizations that provide these services with specific expertise and focus on church and ministry budgets. In most cases, we recommend budgeting for professional accounting, bookkeeping, and payroll services.  This budget line item will feel disproportionately high for a church budget (especially for a new church plant) but will pay high dividends in financial organization and in freeing the ministry team for focus on the mission. See “Recommended Bookkeeping and Payroll Solutions” below.

    In some cases, churches and church plant teams will have uniquely gifted individuals serving in their church body who exhibit an expertise in these areas AND a high degree of trust and ownership in the ministry as a whole.  If you are in this situation and are planning to undertake this internally as a church, there are recommendations and roles listed below.  

    • Designate a specific volunteer with experience and gifting on your team to manage this for the church. They need to exhibit proficiency and gifting with numbers and it would be extremely helpful if they had some professional experience in accounting, payroll, and bookkeeping.
    • Designate a deacon or non-vocational elder to oversee finances at the start of a church plant. This leader may or may not be involved in the specific roles and responsibilities but provides the necessary oversight to keep things on track.
    • There are few situations (if any) in which vocational pastors should be heavily involved in the details of and specific responsibilities of accounting and payroll (Please note:  Employees cannot sign their own paychecks).
    • Recommended roles & responsibilities to be filled by one or more gifted individual(s):

    TREASURER

    • Set up bank accounts
    • Set up workers comp insurance
    • Set up benefit plans
    • Health insurance
    • Life insurance
    • Disability insurance
    • Set up accounts with taxing authorities – Federal, State, Local (if any)
    • Review monthly account reports and bank reconciliations
    • Maintain oversight of accountant, as likely has both bank signing authority and also reconciles the bank accounts

    ACCOUNTANT

    • Maintain accounting books using a program like Quickbooks or other.
    • Prepare bills for payment – This is your church “accounts payable” department. 

    MANAGE GIVING DEPOSITS

    • Donor tracking and management (see details in the next section).
    • Annual giving receipts
    • Track gifts by various funds – general, missions, etc.

    PAYROLL 

    • Committed to understanding pastor payroll and taxes.
    • Organize and administrate church payroll or coordinate with the church’s hired payroll service (see recommendations below).
    • Create and manage policies for various pay structures for the church (W2 pay, stipends, internships, etc.). Please the Crossway Ministry Handbook template in Section C below. The Handbook addresses many payroll and employee management systems that can be adopted for churches at various levels (as of April, 2021, this handbook is under development).
    • Please see recommended solutions below.

    Recommended Bookkeeping and Payroll Solutions

    • Xcelerate Business Solutions (See Church Plant Pricing)  Xcelerate Business Solutions offers a period of free bookkeeping and accounting service during a church plant’s pre-launch phase however payroll services are charged immediately if needed to compensate staff during that same period. For more help connecting with Xcelerate, email admin@crosswaynetwork.org 
    • Ministry Works by Brotherhood Mutual – Payroll Services.
    • Realm Accounting and Payroll by ACS Technologies. If you are a Crossway Network church leader and would like information on a Realm Accounting and Payroll, please email Admin@crosswaynetwork.org. Note that it will not be cost effective for a church to use Realm Accounting and Payroll without using Realm Connect as their main church management software (see Step 5 below). However, a church can certainly use Realm Connect for overall church management and choose a different independent accounting and payroll service.
    STEP 4: SET UP A DONATION COUNT, DEPOSIT AND RECORDING PROCESS

    Every church budget, by God’s grace, grows out of the generous donations of God’s people. It is vital that an organized process is established from day one in the life of the church to record, report, and manage donations with clear accountability. Each church can develop its own methods but here are the essentials to consider:

    COUNTING PROCESS

    Establish a clear and secure counting process for church offerings.

    Determine a secure way for giving to take place on Sundays (i.e. lockbox) and online (CCB, Realm, etc.) 

    Create an Offering Counting Form to document all gifts on Sundays. 

    Who will be counting the offering? Establish counting team, financial team or involve deacons/leaders to have at least 2 non-related counters on Sundays.

    Determine who will be receiving other donations (i.e. through the mail) and process for accountability and handling of funds. 

    DEPOSIT PROCESS

    • Establish a process for safeguarding donations and depositing to your bank as soon as possible. 
    • Some banks provide automatic deposit software where checks can be digitally deposited.
    • Store record of deposit (deposit slip) with donation counting form.

    ACCOUNTING AND RECORDING PROCESS

    • All incoming cash and checks should be counted and recorded for purposes of historical data and giving records. This should be stored in church management software like Realm, CCB, or a similar online database accessible for year-end tax purposes.
    • Work with an accountant to create a chart of accounts to allow all donations to be categorized and tracked appropriately (ie general giving, building giving, missions fund, etc.) 
    • Notify donors when year-end giving statements are available (no later than early February of each year).
    STEP 5: CHOOSE CHURCH MANAGEMENT SOFTWARE

    We encourage churches to implement a church management software platform from the beginning. In many cases, this will also be the software used to integrate an online giving platform. We have researched a number of the many options available and have currently landed on ACS Technology’s “Realm Connect” as a recommendation. We have negotiated group pricing at a significantly discounted rate (including 3 months free for church plants). If you are a Crossway Network church leader and would like information on a Realm Connect Membership, please email Admin@crosswaynetwork.org

    Section B: Annual Review Checklist

    PART 1: ANNUAL MEETING – CORPORATE MINUTES, DOCUMENTS AND RESOLUTIONS

    As an established Nonprofit Corporation (see Section A above), it will be necessary for you to conduct at least one meeting of the Board of Directors annually. Your Bylaws should specify how and when to conduct the annual meeting. The agenda for this annual meeting should be similar to what follows:

    • Call meeting to order
    • Read and approve minutes from last meeting
    • Verify a quorum exists
    • Receive Financial Reports (Statement of Activity, Balance Sheet)
    • Conduct all business of the corporation
    • Elect Directors
    • Review and pass any resolutions needed.
    • Choose Corporation offices
    • Review of any possible or pending need for Insurance to protect Corporation Officers and Directors
    • Review and sign the Conflict of Interest Policy yearly.
    • Record and keep minutes of the meeting and all resolutions made in a secure location.
    PART 2: FILE CORPORATE PERIODIC REPORTS WITH SECRETARY OF STATE

    After your Articles of Incorporation are filed and you are registered non profit “business,’ there are some ongoing maintenance type procedures that you will need to stay up on.  In most states you will need to file an annual report of items the local government requires for all businesses.  While there are many similarities in the yearly reporting process, every state has its own unique requirements. 

    Click here for a definitive resource and recommendations on state by state reporting requirements.

    For example, in Colorado:

    If you choose to receive annual email reminders (Sign up for email notification) you will get an annual reminder to file the form with the state in Colorado. See your unique guidelines for states other than Colorado.

    In Colorado the reminder link will take you to the Secretary of State’s Business Information site where you will be able to fill out and submit the Periodic Report. There is a $10 fee associated with the filing. If you are late with the filing there is a substantial penalty also charged. The filling will keep your organization in Good Standing with the state of your residence. 

    A simple form that takes only a few minutes to complete. In many states, incorporated churches are required to file this annually with the Secretary of State. This is required to ‘authenticate your business entity.’

    PART 3: MAINTAIN IMPORTANT RECORDS
    • Important Records / Tax records
      • Articles of Incorporation – The most authoritative legal document a church has.
      • Periodic Reports filed with the state yearly – The annual report filed with the state to keep your non-profit in good standing with the state.
      • Corporate Bylaws – The church’s rules of internal administration.
      • Policy Manual and any updates – The current policies that guide operation of your church.
      • Annual and other Board of Directors meeting minutes – The records that document election of board members and decisions that are made on behalf of the church.
      • Annual Conflict of Interest Statements – The annual agreement of board members that they understand and will comply with the educational and/or charitable purposes of the church to maintain federal tax-exemption.
      • Yearly Property Tax Exemption filings – The document and record of fees paid to the state to maintain your church’s standing for property tax exemption.
      • Insurance Policies for facilities and employees – The insurance coverage provided by the church’s current insurance provider for any facilities and employees. 
      • Annual Budget and minutes of Financial Advisory Team – Records from the team that meets annually to set the budget for the coming year and makes any other important financial decisions/policies.
      • Periodic/Monthly Budget review – Regular review by the church board/or other appointed persons that ensures that appropriate safeguards are in place to maintain proper fiscal accountability.
      • List of members if official membership exists – A current list of all the people that have formally committed to membership.
      • Minutes of any general church meetings – A record of the issues discussed  and decision made during any general church meeting.
      • Payroll tax forms – All records of earning for each employee and the distinction of the payment for both salary and housing allowance for those pastors/ministers that qualify. 
      • Housing Allowance designations for your pastors – Designated housing allowance for each qualified pastor/minister adjusted yearly usually in December for the coming year.
      • Contribution records – Confidential record of the non-taxable giving to the church that will be reported yearly to each person giving in support of the work of the church.
      • Any other forms you have filed with federal, state and local governments.
      • Employment records including applications, references checks and other documents relating to employees.
      • Unrelated Business Income Tax – A church may need to pay Unrelated Business Income Tax (UBIT) if the church regularly carries on a trade, business or leases their facility to a business or organization that is not substantially related to the organization’s exempt purposes.

    PART 4: FILE PROPERTY AND SALES TAX EXEMPTION YEARLY

    Most states require you to file a yearly property tax exemption with the state. Some states will send you a yearly reminder before April 15. See instructions above under Administrative Guide Section A. You will need to know your state’s requirement as some states do not require a yearly update.

    Revisit “Sales and Property Tax Exemption State by State” above in Section A, Step 1 or see the state by state resource on our site here.

    Section C: Church Policy Manual Template

    POLICY MANUAL TEMPLATE – WITH FORMAL MEMBERSHIP

    In today’s legal environment, it is essential that every church clearly defines its mission, purpose, and non-profit function as well as its agreed upon convictions and beliefs in the exercise of its faith.  A Policy Manual (often called a church’s “Constitution”), while not legally required like your state Articles of Incorporation and your Corporate Bylaws, provides this layer of explanation and protection in the event that that there is legal conflict with the church. It is for church record and to be published publicly at your discretion.  It does not need to be filed with any other authority or legal entity.

    This document it intended to be a tool to help a church form its own policy manual but once edited and completed should be evaluated and affirmed by an attorney.  The content of this template is fully consistent with Crossway Network’s Statement of Faith, Biblical Convictions, and commitment to plurality in pastoral leadership.

    Policy Manual Template with Formal MembershipDownload Here

    To receive a MS Word Doc form of this document to edit for your church with permission, please email admin@crosswaynetwork.org.

    POLICY MANUAL TEMPLATE – WITHOUT FORMAL MEMBERSHIP

    In today’s legal environment, it is essential that every church clearly defines its mission, purpose, and non-profit function as well as its agreed upon convictions and beliefs in the exercise of its faith.  A Policy Manual (often called a church’s “Constitution”), while not legally required like your state Articles of Incorporation and your Corporate Bylaws, provides this layer of explanation and protection in the event that that there is legal conflict with the church. It is for church record and to be published publicly at your discretion.  It does not need to be filed with any other authority or legal entity.

    This document it intended to be a tool to help a church form its own policy manual but once edited and completed should be evaluated and affirmed by an attorney.  The content of this template is fully consistent with Crossway Network’s Statement of Faith, Biblical Convictions, and commitment to plurality in pastoral leadership.

    Policy Manual Template Without Formal MembershipDownload Here

    To receive a MS Word Doc form of this document to edit for your church with permission, please email admin@crosswaynetwork.org.

    Section D: Church Policy Templates

    SEE POLICIES UNDER DEVELOPMENT

    This portion of the Administrative Guide will include a growing number of templates for creating church policies for a variety of key positions and the different areas of ministry in your church. The following are examples of what will be covered:

    1. Giving and Financial Policies (including Financial Advisory Teams)
    2. Children and Youth Ministry Policies
    3. Security Policy
    4. Missions Policy
    5. Computer/Media Use Policy
    6. Facility Use Policy
    7. Vehicle Use Policy
    8. Position Papers

    Section E: Employee Handbook Template

    UNDER DEVELOPMENT

    This portion of the Administrative Guide will cover the following key items in addition to a growing list of other possibilities.

    1. Understand your Federal and State Requirements
    2. Hiring Policies and Documents
    3. Employee Benefits
    4. Maintaining Necessary Employee Records
    5. Minister Ordination/Licensing
    6. Minister Tax Issues