Occasionally, we are called upon by clients to help form a start-up organization. In some instances, the engagement is for a brand new church. Sometimes, an existing church wants to form a companion institution or subsidiary.
Existing churches often consider forming an additional organization for different reasons. For some, the risk of managing a line of business can be better controlled in a separate corporation. For example, activities such as a school, day care, and community development ventures can be separated from the church’s main business. This separateness allows leaders to segment risks to a particular company.
Forming a new corporation can be an exciting time for a church body. There are aspirations for the needed services the church will offer to the community. The organizers have good ideas on what results they want to achieve. After the decision to begin has been made, next comes the organizing process.
Creating a new corporation in North Carolina requires filing a document called the Articles of Incorporation with the NC Secretary of State. This form asks questions such as the purpose of the corporation, the name(s) of the organizers, and identity of the registered agent and corporate officers.
Each corporation needs a governing board. The board can be one person or several individuals. The typical officers of the board include the chairperson, secretary, and treasurer. Additional officers can be added as needed.
Corporations should be choosy about who sits on the board of directors. The directors should be persons who understand the business of the organization. The board members must be loyal to the institution. We have learned that diversity of skills and experience often lead to better strategies.
Each director should be chosen for the specific skills needed by the organization. A well-balanced board has directors whose credentials complement each other. Skills needed for a board may include finance, marketing, communications, leadership, legal, and regulatory disciplines.
After the corporation has been formed, the new board needs to hold its initial meeting. At this first board meeting, the board should elect its officers, choose how the organization is to operate, and ratify any pre-charter decisions.
The board may consider its banking and financial needs. Separate accounts should be opened to avoid commingling funds with the sponsoring church. To open a bank account, the board should get an EIN, Employer Identification Number, from the Internal Revenue Service. The EIN is sort of like a social security number for the organization. The EIN is needed regardless of whether the organization plans to hire employees.
The board should discuss what policies are needed for the corporation. One of the most important policies is the bylaws. The bylaws establish the high-level rules of governance. Other policies may include a conflicts of interest agreement, director position descriptions, standing committee charters, code of ethics policy, data privacy policy, and operating rules.
Other matters for a new organization involves day-to-day concerns. The creation of a web site, marketing materials, office address, and staffing should be decided by the officials. Hiring an executive director or managing officer can be helpful to ensure day-to-day details are handled.
Once the organization has been set up, funded, and ready to open for business, the board should shift its focus to strategy. Such discussions involve setting the mission, vision, and direction of the organization. These conversations will help with forming a strategic business plan for the corporation. The result of board discussions should lead to directives that will help ensure the organization is heading in the intended direction.
There are higher level considerations for the board of a new corporation. Matters such as liability insurance, surety bond, and contracts should be carefully weighed. These issues can be thoroughly discussed by the board over a course of several meetings.
Getting a new organization started on the right foot is the responsibility of the board and management. It is important that critical conversations take place to make the right decisions for the future.