Membership Corporation Law

Most churches are formed under membership corporation law.

Membership corporation law governs organizations that are created for purposes other than to make a profit. These are generally referred to as religious organizations and labor unions, though other types of not-for-profit organizations have members rather than shareholders.

State Law

The formation of a membership corporation is governed by state law. Generally the process of incorporation is easier than the procedure for a for-profit corporation and the filing fee is smaller.

Federal Law

Although membership corporations must organize under state law, doing so does not mean that the corporation is necessarily exempt from state and federal taxes. To be exempt from taxes and to have contributions to the organization deducted from the giver's federal income taxes, the membership corporation must apply for and be granted a 501(c)(3) exemption by the Internal Revenue Service.

Famous Ties

Sometimes people who form membership corporations think they can run them like for-profit corporations. Evangelists Jim and Tammy Faye Baker fell victim to that wrongfully held belief in a well-publicized scandal that toppled their vast empire.

References

• JRank: Membership Corporation
• Texas Secretary of State: Nonprofit Organizations
• BNET: Jim and Tammy Faye Baker