Business Inside The Church

All right, ladies and gentlemen, thank you for joining us for another episode with Wes Carter of Winters and King and churchlaw.tv.

How are you doing today, sir?

I’m wonderful, thank you.

Good, so glad to have you. I always feel like you give us so much great knowledge and information about church law and pastor compensation, among other topics. What do you have for us today?

Today we’re going to talk about businesses inside the church. So whether that’s a business activity the church carries on or a separate for -profit business that the church owns.

So church -owned business. So when you first said that, the first thing my mind jumped to was like the bookstore inside of the church. Is that what you’re talking about?

Exactly. Bookstores, coffee shops, thrift stores, anything that would be an activity that’s not obviously related to your religious mission.

So businesses that are like associated with the church.

Right. So for instance, as a nonprofit, A church doesn’t pay income tax on any of its income coming in from exempt purposes, so church purposes. Any activity that’s not related, substantially related to your purpose as a church, if it’s regularly carried on, you know, it’s more than just once a year, for instance, like the church bake sale, we don’t worry about those random things once a year. If it’s regularly carried on, then the church will probably have to pay income tax on that. So what happens is, let’s say I have a coffee shop. My coffee shop’s generating money from selling lattes, and that money is, as a general rule, taxable income.

And a church then would report that income to the IRS on something called a 990 -T. So that’s important because churches otherwise don’t file anything. so you have to file to report that income tax and then you pay normal corporate income tax rates on that okay so we get I don’t want to get too far in the weeds but everybody can follow me here so that’s a general rule if it’s not related to your purpose as a church you pay tax on it now there are always exceptions and then exceptions to the exceptions. So we’ll try to hit some of those. So what a lot of churches use, one of the exceptions is convenience for the members. So with that exception, the easiest way to put this probably is if your coffee shops or your bookstore, whatever this business is, is open when your members are there and you’re having service, you’re probably fine.

What happens is that’s going really well. And so we decide, well, it would be even better if we were eight to five Monday through Saturday. Now that’s not for convenience of your members anymore. That’s open to the general public. And you get right back into taxable income. Some of the other common exceptions to the general rule are if it’s staffed by volunteers, then you can get away, you know, there’s an exclusion, you wouldn’t pay, it wouldn’t be taxable income.

Or if you’re selling all donated goods. So okay, thrift store. Or I’ve even had some people get creative where they donate the coffee. So there’s ways to get around it. But the general rule, if it’s not related to your purpose, it’s taxable.

And then you have to look closely to make sure it fits into one of these exclusions.

Okay, and as a church member who loves when they have the coffee shop open when I’m there, like I really appreciate that.

It’s always better with caffeine. You get a little bit of caffeine, wake you up. So you guys, you know, at Winners and King and churchlaw.tv, you can help everyone kind of navigate the church law and figure out gonna work best.

Because from what you’re describing, it seems like there are a lot of different options available. A lot of different options and sometimes the activity blows up and is doing really well to the point where I don’t really want to file a form with the IRS underneath the church itself to report taxable income. And if we get too much taxable income relative to what the income in the churches. So a smaller church, for instance, that has a huge coffee shop, that can jeopardize your tax exemption if majority of your activities and money is coming from a for -profit activity. So sometimes what we’ll do is actually start corporation or LLC that the church owns. We’ll spin the bookstore or the coffee shop into that separate for -profit, then it can go bonkers and do whatever it wants.

It can advertise, it can sell, it can hire people, operate like a for -profit. and file its own tax returns, and the church as owner gets what’s left.

The net gain, just like any other owner, what’s left after it pays its bills, still flows back in the church for missions, or the general fund, or whatever they’re using that income for. This is great. So you can really help clients kind of navigate and decide what’s going to be the best route for them and how to preserve, you know, the integrity of what they want to do with their church and then what they also want to do with this, you know, bookstore or coffee shop. Do you see a lot of different cases like we’re navigating church law? What’s the spectrum of what you guys deal with and what do you see?

Like give us something that would be maybe, you know, on a smaller scale and then what do you see all the way on a grand scale? Well, with businesses in particular, You know, it’s starting to improve a little bit now in our area here in the Midwest that energy’s coming back a little bit, but over the last few years it’s been really rough for smaller non -profits. Giving’s been down, just the economy in general has been a little depressed. So we’ve seen many more small ministries and churches turning to business ideas to fund their religious purposes. And so I had one church that had an ice cream parlor in the front, that’s how it paid the bills. I have a ministry here in Tulsa that they were missionaries in Ecuador, I believe, and use those connections to get coffee from Ecuador to start a coffee business online to help.

The IRS, those two things don’t count as exempt activities, but if you need money to travel to minister or to pay the bills, they’re trying to figure out any way they can to keep the lights on at the ministry. All the way up to, I have some very large ministries that do micro -financing in other countries, which is a very interesting hybrid of for -profit and non -profit activities. So, for instance, they go into Sub -Saharan Africa and go into a small village and people apply for micro -loans, which, you know, very small loans. So, you know, I’ve seen For instance, a lady that’s really good at weaving baskets. So she’ll get a small loan to start her own business and become an entrepreneur. She’ll pay back that loan with a very small amount of interest, and the money they make goes into other small loans in the community.

So it’s like running a very small bank, but it’s inside a nonprofit with a goal of economic improvement in that particular community.

So those get into a whole other area, but a very interesting area of where that for -profit, non -profit world kind of collides. I like it. And see, I love you can explain the gamut. what you all can service and what you provide for clients at Winners and King and churchlaw.tv when you’re dealing with, you know, church law.

I love supporting businesses when I see that they do those micro funding or micro loans because I think, man, what power is that to just change the trajectory of someone’s life, you know? It’s great. I mean, whether it’s someone out there digging wells or building houses or just all, you know, People all over the world have entrepreneurial spirits.

And so to give some people in a really economically void area the power to start just the smallest business, that little seed, it’s pretty cool. That’s life -changing. So again, what I love about you guys at Winters and King is just how you described you can help anyone navigate church law. And I love, you said you have some small businesses, the ice cream parlor that’s helping to fund the ministry, or the coffee that’s gonna help with the travel, all the way up to micro -funding.

What would you say to someone if they’re thinking, you know, I might need help with church law, I’m not sure if I do, I don’t know if we’re too small, or what would you say to someone who’s just considering, you know, should I should I reach out? Well we do everything in our power to keep our services available to everyone. So we have been blessed to work with some of the largest churches and ministries in the world. I have clients probably 40 or 50 foreign countries, but if you go to our website, churchlaw.tv, you’ll see right there, which I think is pretty uncommon for a law firm, our flat fees to do certain things, like start a church, start a ministry, file a trademark, file a DBA. I wanted to put the prices out there online for everyone to see, so that they feel comfortable that they can afford us, and that our prices

for those services are similar to a non -law firm website they would go to to try to get help.

Nice. And so we try to make, you know, our heart is to help as many people as we can and keep as many people as we can out of drama and problems that come with doing it wrong.

So we do everything we can to help the people that just have an idea and are just starting, all the way up to large organizations that maybe have gotten off the path or just need some advice on a specialized topic? I think that’s my favorite thing about you all at churchlaw.tv and Winners and King, that you’re so transparent and that you’re really for every man. I think that’s my favorite thing when I get to… Or woman. Yes, or woman, yeah. Yes, I love that because, I don’t know, growing up, sometimes you have this idea or this stigma that, you know, lawyers, only certain segments of the population can use lawyers.

Do you guys have to deal with that? We get that often. Probably even, you know, I think it’s everywhere, but more common in rural areas or urban areas. they’ve never dealt with attorneys most of their lives. We see it as a more privileged thing to get access to, and that’s one of the things we want to try to combat is, you know, if you have a small, tiny church, small, tiny missions organization, food pantry, whatever it is, you know, we have free 15 -minute consultations on the first call, and, you know, we can explain what the cost will be. We’re very conscientious about costs, especially, you know, we know how it goes with smaller organizations.

So just reach out.

I mean, the worst thing we can do is you can get free 15 minutes and go away. It’s kind of like a no -brainer. Yeah, it’s like a no -brainer. So if you are listening and you need help, if you need more information about Church Law, Wes Carter and the associates at Winters and King, they can help you. Visit churchlaw.tv.

What number do you want them to call? Maybe they want to give you a call.

What What should they do?

Our phone number is 918 -494 -6868 and then also at our website churchlaw.tv we have a place where you can email us any questions you have. Okay, great. Thank you so much.

Looking forward to next time. Thank you again.

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