Remember: Almost all corporate and trustee matters are governed by state law. An attorney familiar with your state's laws in these areas should be used. They should also review all sample forms to ensure they comply with controlling state law.

• Requirements of the Presbyterian Church ( U.S.A.) Constitution
• Forming a Local Church Corporation
• Fiduciary Duty of Trustees
  • Investment of Funds
  • Church Property
  • Annual Report and Record Keeping
  • Building Committees and Programs
  • Sample Articles of Incorporation —
  • Sample Corporate Bylaws —

The church itself does not incorporate; instead, it causes a corporation to be formed. This is a recognition of the difference between ecclesiastical jurisdiction (reserved to church courts) and civil jurisdiction (in civil courts). See the chapter titled "Basic Organization of the Presbyterian Church (U.S.A.)" for a discussion of this topic.

Corporate statutes generally refer to a board of directors. The Book of Order uses the term trustees instead of directors. This discussion will use trustees.

Chapter VII: The Particular Church sets out various directives regarding incorporation at the particular church level. These provisions are set out at G-7.0401, G-7.0402, G-7.0403, and G-7.0304:

• Only members on the active roll shall be members of the corporation and eligible for election as trustees. G-7.0401.
• The elders in active service on the session shall, because of their office, be the trustees of the corporation. G-7.0401. Note: The ministers are not members of the congregation and, so, are not trustees or officers of the church corporation. Also note: For middle governing bodies and the General Assembly, the governing body council shall constitute the board of the trustees unless the governing body determines an alternative method. G-8.0202.
• This is an efficient model that allows the session/board of trustees to move forward with the church's mission (as the governing body) and corporate matters (as the corporate board of trustees) at the same time. It is the preferred model. G-7.0401.
• Some states, however, prohibit this dual capacity. Also, some churches choose to have a board of trustees different from the session. If either of these is the case, another method of electing trustees may be established. Any such alternate method shall provide for a nominating committee elected by the corporation and for trustee terms the same as those provided for elders. G-7.0401. Other important elements arise when the session is different from the board of trustees:
  • It is very important to establish regular communication between these bodies. Annually, and as requested by session, the board of trustees shall provide reports to the session. G-9.0407a; G-10.01021.
  • The session should designate the specific functions of the board of trustees so it understands its duties and authority. Such planning will help avoid disputes.
  • Always remember the session, not the board of trustees, has responsibility for the budget, mission giving, and property. G-10.0102 h,n
• Where a particular church does not form a corporation, it may select trustees from the members on the active roll. G-7.0401.
• The corporation and its trustees perform their work subject to the authority of the session. G-7.0402; G-10.0102m. The power and duties of trustees shall not infringe upon the powers and duties of the session or of the board of deacons. G-7.0401.
• Pursuant to G-7.0402, the corporation and its trustees shall have the powers to
  • receive, hold, encumber, manage, and transfer real or personal property for the church;
  • accept and execute deeds of title to such property;
  • hold and defend title to such property;
  • manage any permanent special funds for the furtherance of the church's purpose

Recall that the members of the corporation are the members on the church's active roll. G-7.0401. When corporate membership meetings are required, the following applies:

• Where permitted by civil law, corporate and ecclesiastical business can be conducted at the same meeting. G-7.0304b.
• Where civil law requires corporate business be conducted in a separate corporate meeting of the congregation, the meeting provisions of G-7.0300 shall apply, except:
  • such a meeting shall be called by the trustees in their discretion or as directed by the session or presbytery;
  • unless civil law provides otherwise, the trustees shall designate from the active roll a presiding officer and secretary for the meeting;
  • the meeting minutes shall be attested by the presiding officer and the secretary and, then, entered in the board of trustee minutes.
• Proxy voting is prohibited except where civil law specifically requires that proxy voting shall be permitted. G-7.0404.

• Because ministers are not members of the congregation (they are members of presbytery), they are not members of the corporation. G-7.0401. Generally, this means ministers do not serve as officers of the corporation either. Some states' civil corporations laws allow nonmembers to serve as officers of the corporation. While such a provision would allow the minister to serve as an officer, the preferred method is that the minister not serve in such a capacity. The corporation president, not the minister, should preside at corporation meetings.
• The Book of Order does not limit governing bodies to one corporation but this is both the most common and preferred structure. Generally, a single corporation should be able to perform all the civil law functions a typical church or middle governing body needs. When a governing body chooses to establish second or third corporations, it must ensure
  • all the Constitutional requirements noted above are in place;
  • every power of the subsequent corporation is very carefully defined and such powers are integrated securely in the session (GA 1990, p. 243);
  • clarity between the duties and authority of the first corporation versus those of subsequent corporations.

Under the law, a corporation is a separate legal entity from its officers, directors, and its incorporators. Corporate powers are conferred by the articles of incorporation (sometimes called the corporate charter) and by the state corporation statute. As noted above, corporate requirements are also set out in the Book of Order. The corporate form provides a continuous entity for the ownership and management of property and for carrying out the business and programs of the corporation. Assertions of liability for acts undertaken by the corporation may be satisfied, if proved, from corporate assets only, rather than from personal assets of the corporate directors/trustees. Note, however, that in cases of fraud against the corporation by a director/trustee, or where corporate formalities are not followed, a case can be made that the corporation is acting as an alter ego of its directors and personal liability can be imposed.

A corporation derives its powers and existence from the state. The sources of its powers are its articles of incorporation and the state statute under which the corporation was organized. The statutes grant numerous specific powers relating to organization, the use and conveyance of property, the election of officers, the amendment of articles of incorporation and bylaws, the right of dissolution, and the like. Care should be taken to ensure all corporate documents conform to the Book of Order. See the sample corporate articles () and bylaws ().

The express powers of a corporation are those related to the activities in which the corporation is engaged that are enumerated in its articles of incorporation. Implied powers arise out of reasonable inferences about the scope and intent of the language of the corporate articles as they relate to certain facts and circumstances. Great care should be taken by the church corporation to ensure that its acts and transactions do not extend beyond its limits of authority. Such acts are termed ultra vires and should be expressly barred by the corporation's articles of incorporation.

Procedures for forming and organizing corporations vary from state to state. However, general incorporation statutes in the vast majority of jurisdictions allow for the issuance of articles of incorporation to certain persons by a designated state official (usually the Secretary of State) in compliance with the provisions of the corporation statute. The typical state incorporation statute requires:

1. The preparation and execution of the articles of incorporation by the incorporators, and the acknowledgment of their signatures before a notary public.
2. The delivery of the articles of incorporation to the Secretary of State, including any other required incorporation papers and payment of required organizational fees.
3. Filing of the articles by the Secretary of State, and subsequent issuance by her of the certificate of incorporation.
4. The recording of the Certificate and Articles of Incorporation with the Recorder of Deeds, or any other county officials as required in the county or parish where the corporation is located.
5. The convening of the first corporation organization meeting at the call of the directors to adopt bylaws, elect officers, and transact other business.
6. The procurement of a corporate seal and the commencement of business.

1. The name and address of the corporation.
2. The address of its registered agent for the service of process, notice, or demand upon the corporation. Usually the agent will be the board of trustees, inasmuch as it manages the business of the church about property and other legal affairs.
3. The duration or tenure of the corporation, which may be perpetual or limited. Church corporations are typically perpetual in duration.
4. The names and addresses of the incorporators.
5. A statement of purpose for which the corporation is formed.
6. The names and number of trustees constituting the initial board of trustees, and the names and addresses of those who are to serve as the initial trustees.
7. Membership of the corporation.
8. The powers of the corporation.
9. Procedures for the adoption of bylaws by the board of trustees.
10. Definition of the quorum of directors needed to transact corporate business.
11. Procedures for amending the articles of incorporation.
12. Provisions for the distribution of assets upon dissolution of the corporation.

See the beginning of this chapter for the specific requirements for corporations formed by Presbyterian Church (U.S.A.) governing bodies. Also see the sample corporate articles ( ) and corporate bylaws ( ).

After completion of the incorporation, care should be taken to deed all property into the new corporation. Real property can be deeded by use of quit claim deed. This transfer process presents an excellent opportunity to review the title to property, to determine if there are any limitations or reversionary interests and to make sure that the property trust clauses are put into the new deeds. See the Property chapter for suggested trust language to be used in deeds.

State incorporation statutes vary. Many states now have special not-for-profit corporation statutes or religious corporation statutes that significantly decrease the reporting requirements and filing costs for such corporations. Local counsel should be instructed to incorporate under such statutes if possible. Some states (pricipally in the northeast) have incorporation statutes for the particular mainline denominations: Presbyterian, Congregational, Methodist, Lutheran, and so on.

Note: Sample corporate articles and bylaws are included at the end of this chapter. Each state has different incorporation requirements. These forms should be a useful starting point for local legal cousel.

Another very good resource is the Companion to the Constitution, Polity for the Local Church. This book is produced by the Office of the General Assembly and published by the Presbyterian Publishing Corporation. It is a very useful guided to the Presbyterian polity and procedures of especial importance to congregations, their members, and the session. In addition to corporate materials, it has chapters on Organizing a Particular Church, The Particular Church and Its Members, Nominating, Electing, Ordaining and Installing Elders and Deacons, Calling and Installing a Minister of the Word and Sacrament, Property and Finances, Meeting and Minutes, and Conflicts in the Particular Church. This book also has variety of useful forms for the particular church. It is available at the Presbyterian Publishing Company or by calling (800)227-2872.