Preparing to Charter a United Methodist Church

Before Incorporation[1]

As you do the work of spreading your vision and gathering your flock, you must also do the administration work of creating your organization.

[Editorial note: It is not practical to assume that a person with the spiritual gifts to grow a new faith community would also have the gifts to administrate the group. Find people, whether paid or volunteer, who have the complementary gifts to yours, to work with you from the beginning of the process.]

The following are the steps it takes to become an independent non-profit entity in Minnesota. While you are working toward this status, you will have a financial sponsor processing your money for you. Typically, your financial sponsor will either be the Conference Office or an existing church.

This list was created backwards; for a faith community (referred to as “church”) to have assets or a bank account they must have a Federal and State (Minnesota) tax identification number. To get both of these identification numbers the faith community must incorporate with the secretary of state, etc. [Some faith communities have opened personal checking accounts using the social security number of a key member and a “doing business as” designation. This is NOT recommended. There are challenges in transferring the name and financial implications of taking this route.] For the exact language required by GCFA please go to http://umgroupruling.org/.

Action / How to Proceed
1. Naming - Select and secure the new church’s name. / 1.1 Research church names in the area, so you do not select the same name as a nearby church, business or other United Methodist community in the area.
1.2 Check the Minnesota Secretary of State’s website – www.sos.mn.us – where you can check the availability of the proposed name.
1.3 IF and ONLY IF church plant has been doing business as another church, complete a Certificate of Assumed Name, file it with the MN Secretary of State (ONLINE FILING FEE: $90) and then publish it in the local newspaper (PUBLISHING FEE USUSALLY AROUND $90). The Certificate of Assumed name is available on the MN Secretary of State website – www.sos.mn.us – under “Business & Nonprofit – Forms – Assumed Names/Sole Proprietorships.” The form has instructions on how to complete, file and publish it.
2. Officers - Establish a Board of Trustees / 2.1 Board of Trustees is to consist of not fewer than three nor more than nine individuals. Preferably an odd number for voting purposes. They are named in the Articles of Incorporation or appointed by the incorporator.
2.2 Appoint Chairperson (president), vice chairperson (vice president), secretary, and treasurer, from the trustees.
2.3 The Chairperson also serves as the church’s incorporator. Their social security number will be linked to the church in order to set up the EIN and MN Tax number. MAKE THEM AWARE.
Be sure to refer to and follow the Book of Discipline ¶2525, 259
3. Obtain the church plant’s GCFA number. / Contact BJ Olsen at the MN Annual Conference to acquire this number.
4. Obtain a Federal Employer Identification Number (FEIN or EIN – IRS withholding tax number) / Complete and file IRS Form SS-4 or apply online. The form is available online at www.irs.gov/formspubs. You can apply online at www.irs.gov/businesses (Employer ID Numbers).
5. Obtain the Group 501(c)(3) Ruling from GCFA. / Contact Bj Olsen. EIN and GCFA number are needed to obtain ruling.
6. Ensure insurance coverages are in place. / Coordinate with the Director of Congregational Development. Typically you will be under the MN Annual Conference insurance policy until incorporated.
7. Staffing, etc. / 7.1 The pastor is self-employed for federal and state income tax, Social Security (FICA) and Medicare tax purposes. Typically, they will be paid through their financial sponsor (either the MN Conference or an existing church) for the first two years of a new church start.
7.2 For other employees, federal and state income taxes, Social Security and Medicare taxes must be withheld and paid. A MN Tax ID number is required for withholding MN income tax. To register for a MN Tax ID, go to www.taxes.state.mn.us and select “Starting a Business” in the “For Businesses” section. Select Minnesota Tax ID. You can file via the website, phone, or paper.
7.3 MN unemployment insurance registration should not be required unless the church elects to have unemployment insurance coverage for non-covered employees. This election is made online at https://newhire-reporting.com/MN-Newhire/default.aspx.
7.4 BEWARE of the risks of classifying a worker as an independent contractor (no withholding required) if the worker’s relationship with the church is that of an employee. More information on this topic can be found on the IRS and MN Department of Revenue’s websites.
7.5 If the church will have employees, develop and adopt basic personnel policies including policies requiring background checks as a condition of employment, online usage, confidentiality, vacation and sick leave, etc. Consult with qualified legal counsel on these issues. Use other churches’ personal policies as an example.
7.6 Conduct a background check on all new hires. Safe Sanctuaries is the MN Annual Conference recommended service and can be access through the MN Conference web page. Secure Search is another option.
7.7 Report new hires to https://newhire-reporting.com/MN-Newhire/default.aspx.
7.8 Create a CONFIDENTIAL personal file for each employee. Keep these files in a locked file. Each file should contain:
·  IRS Form W-4 (withholding)
·  I-9 (documentation of ability to work in US)
·  Job Application
·  Offer Letter
·  Signed copy of review of personnel policies or employee contract
·  Annual Performance Reviews
·  Wage Change Forms
7.9 Contract with a payroll service for management of payroll and filing of year-end W-2s and payroll taxes. An experienced bookkeeper may also do this.
7.10 Review the section on “Church Reporting Requirement” in the Church and Clergy Tax Guide.
7.11 Purchase a copy of the Alban Personnel Handbook for Congregations and When Moses Meets Aaron: Staffing and Supervisions in Large Congregations (both available at www.alban.org) to become familiar with personnel and supervisory practices. These books are available for use at the MN Annual Conference office.
7.12 Contact BJ Olsen at MN Annual Conference to enroll in the group workmen’s compensation program.
8. Incorporate / 8.1 Complete Articles of Incorporation of a MN Non-profit Corporation and file the Articles with the MN Secretary of State. This may be done online at www.sos.mn.us. A sample form is available on the MN Secretary of State’s website under “Business & Nonprofit – Forms – Minnesota Nonprofit Corporations. Samples are also available from the MN Annual Conference. ONLINE FILING FEE OF $90 (avoids the assumed name process in step 1).
8.2 Articles of Incorporation should include statements of purpose along the lines of those set forth on the attached Schedule A.
9. Open bank account(s). / You will need to have completed Steps 1-8 before opening a checking account. You will also need to have in place basic financial practices if you do not have another United Methodist Church serving as your financial sponsor.
People needed:
·  Counters for offering and deposit procedures.
·  A minimum of two signers for checking account. SIGNERS cannot be the PASTOR.
·  A voucher system for payment requests of expenses/bill.
·  A bookkeeper (may be a volunteer) who will to track income/giving and create contribution statements, pay bill, and create monthly reports. This person should also know how to process payroll.
Purchase a copy of Church and Clergy Tax Guide, available from www.churchlawtodaystore.com. Become familiar with the section on charitable contributions. This book is available for use at the MN Annual Conference.
EIN and Articles of Incorporation needed to open bank accounts in MN.
10. Procure necessary insurance coverages. / The separately incorporated church will not have the protection of the Annual Conference coverages. Coverage should include property, liability (in case of injury), directors and officers coverages, bonding for treasurers, and misconduct of pastor.
11. Apply for MN Sales Tax Exemption / Complete the Application for MN Nonprofit Exempt Status – Sales And Use Tax and submit with the form with the required paperwork. The form is located at http://www.revenue.state.mn.us/Forms_and_Instructions/st16.pdf. Processing could take up to 90 days. So church will need to pay sales tax on purchases until they are approved and have a Sales Tax Exempt number.
12. Register through Minnesota Attorney General’s office / You will need your EIN and 501c3 numbers. This is renewed on line annually to confirm you are an active non-profit organization.

1

[1] A new church will function as an unincorporated congregation until it has sufficient support to be clear that it will govern and sustain itself. While a new church is an unincorporated congregation, various accommodations including payroll, insurance coverages and other matters will be provided by or arranged through the Annual Conference, coordinated by the Director of Congregational Development, or handled by an existing congregation.