LEGAL WORD WEDNESDAY 9/7/22

Organizational structure and processes are critical for business sustainability and effectiveness. Sound business practices are no less important for faith-based organizations that may often find themselves at the center of unexpected and costly legal issues because of a failure to adopt consistent processes and procedures. Whether you are an established religious organization or newly formed, an important first step in getting things in order can be the creation of bylaws. Three key questions as you begin your bylaws journey are:

1) Should my faith-based organization incorporate?

Some benefits of incorporation can include protection from personal liability, formal recognition as a non-profit legal entity, and eligibility for certain federal or other faith-based grants for church ministry and programs. Incorporation can also help further identify official organizational leadership and their roles, which can be important for purposes of indemnification and insurance.

2) Should my faith-based organization indemnify its leadership?

Through indemnification, the faith-based organization agrees to shield leaders from losses and damages that may result from their reasonable and legitimate business decisions or actions while acting in the capacity of a leader. A faith-based organization’s indemnification policy might also be combined with Director’s and Officer’s Insurance (D &O).

3) What insurance coverage does my faith-based organization need?

Think of insurance beyond merely the church building and instead in broader terms of potential financial risks such as vehicle accidents, personal injury to members or guests, allegations of sexual misconduct, and even employment disputes.

Legal Word Wednesday is intended to provide some quick points on a broad range of topics with potential legal implications for religious organizations. It does not constitute legal advice or establish an attorney-client relationship. KSM has an experienced team of attorneys to help small and large non-profits and religious organizations with employment, contract, compliance, and governance issues in addition to risk management strategies and training.