Answered step by step
Verified Expert Solution
Question
1 Approved Answer
PLEASE HELP!!!!! There are times when a business may choose a structure that does not correspond with the type of business. Usually, when this happens
PLEASE HELP!!!!!
There are times when a business may choose a structure that does not correspond with the type of business. Usually, when this happens the business can start experiencing problems with lawsuits, profitability, tax audits etc. Churches were historically structured as nonprofit, sole proprietorships. The pastor was the owner and made all of the decisions. He would decide whether the church bought property, autos, furniture etc. The pastor would determine what was in the best interest of the congregation. He would decide what to do with the donations and offerings. Under these structures, churches enjoyed tax free benefits, so long as their activities were true to their religious charter. However, somewhere along the way (20-30 years ago), churches began structuring the church as LLCs (Limited Liability Corporation) or Corporations. Under these two structures, the business is required to have a board of directors and officers. The board of directors is the body that makes all of the decisions regarding the organization. Their job is to protect the business from bad decisions that would destroy the business. The officers create and implement strategies to return equity to the shareholders.The board of directors are required to approve those strategies. While churches changed their structure on paper, they did not change the structure in practice. The pastors continued to maintain all of the control and made all of the decisions. Even when the boards were created, the pastors designated themselves as the shareholder, board of director member, and CEO and President. They continued to decide what was best for the organization. More importantly, they continued to collect the offerings and decide what to do with the offerings. In this sense, a lot of money was directed from the organization itself and redirected to provide a lavish lifestyle for the pastor and his family. Then the lawsuits began. As churches structured themselves as corporations, members began suing the churches for mismanagement of money. The churches began losing these lawsuits. The courts held the churches to the same standard as any corporate structure. As a result, they lost the lawsuits, for not abiding by the corporate structure requirements (Shareholders, Board of Directors and Officers). More importantly, when sued, churches were able to keep their personal assets from the lawsuit. I want you to discuss whether you think that churches should be allowed to choose a nonprofit Corporate structure, when the pastor refuses to give up control of the management of the organization. This management would include acquiring assets, expanding, functions and all decisions regarding finances.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started