Chapter Nine
Advice on Corporate Structure
The strongest protection against government interference (although it is declining) is to have your school under the aegis of a church. This arrangement operates with the church as the corporation and the school as a registered fictitious name with your county. The church arrangement offers the most danger for losing control, however, and also prevents you from passing ownership of your school to your children. But there is a way to enjoy the benefits of both.
Lease your school to the church. In this manner, if the church attempts to interfere in the operation of the school, you can cancel the lease and as quick as lightning, you are free. Your lease arrangement would simply state, “one dollar and other valuable considerations.” The property would be in your name. In many states, it is not necessary that the property be in the church’s name in order to qualify for property tax exemption. It is enough that the property be used for “religious purposes.” Check carefully what the laws in your state are before establishing your school.
Another arrangement is to incorporate your school independently of a church. Under a church’s aegis, you don’t have to file a form 990 with the IRS, but under this arrangement, you will. This is just an information return, but it is still necessary to go to the expense and bother. The disadvantage with this arrangement is that, just as under a church as a nonprofit corporation, you will have a board that can give you control problems and inheritance cannot be made to your children.
A third arrangement is as a “for profit” corporation. Under this arrangement, control is not a problem, but your tax bite is higher. The taxes are not the problem you may think, however, since both the taxes and depreciation can be used as deductible expenses on your federal tax return.
There are other alternatives, of course—sole proprietorship, partnership, etc. Your final choice will and should be made only with careful advice, depending upon your personal situation. There is one choice I never advise anyone to take and that is to place a church in both ownership and control of your school. It is heartbreaking to talk with ministers who suddenly wake up in their old age to the fact that they cannot provide for their widows and children after their demise. Too late they realize that a lifetime of work and devotion will pass to people who do not know, understand, and appreciate the blood, sweat, and tears that go into building a school. If a minister reads this and decides consciously to disinherit his family hoping to gain the Lord’s favor, consider the verse, Prov. 13:22: “A good man leaveth an inheritance to his children’s children.”
One of my best friends in the ministry foresaw that he was dying and that his family would not benefit from the church and school he started from scratch 20 years before. When I discussed this chapter with him, he said, “I wish I had had this conversation twenty years ago. I would have done things differently!” Unfortunately, his worst fears came true. His family did realize very little from the $3-4 million dollars’ worth of property left to the control of men who did not know their pastor very long, did not work with their pastor for long, and, I am afraid, will not remember his family for long. Ministers who are bound by oaths of celibacy can justify such thoughtless foolishness, but men who have families should remember that, “But if any provide not for his own and specially for those of his own house, he hath denied the faith, and is worse than an infidel” (I Tim. 5:8).
A preacher should retain the property for his school in his own name and lease it to a not-for-profit corporation if he wishes to retain tax benefits, such as a housing allowance and exemption from social security. The school structure outlined in my operational manual can achieve enough profit so that donations are not needed as in other schools. Therefore, do not solicit or accept donations. Don’t sell magazines, candy, seeds, etc. Finance your school by selling your service, i.e., education. By refusing to beg, you will keep anyone or any group from believing they can dictate to your school. You will also force yourself to operate at a surplus (profit). You will charge the market price for your service. The market will be your measure and guide. When and if the government audits your books, no one can claim you gouged anyone! You accepted money given in exchange for a service. On the other hand, if you take money from donors, you open yourself to the suspicion of private inurement. A school does not have to operate as a begging church. A church should not sell its services, but a school can and should sell its services.
By means of a school, a minister can achieve financial independence and accumulate an estate for his family. I know of no better way that this can be done than mine. Building a school is a unique opportunity.
