The Most Important Compliance Matter

Churches and ministries often overlook this critical responsibility

Max H Herr

7/18/20224 min read

The single compliance requirement that gets corporations of all types in trouble is their failure to file a Statement of Information with the Secretary of State – in California, this is known as an "SI-100" for churches and other nonprofits. While for-profit corporations and LLCs must file a statement of information annually, nonprofits such as churches and other charities only file every other year. The filing deadline is always the last day of the month in which the corporation was originally incorporated. It's very easy to miss, because the renewal notice comes on a small postcard about 60 days in advance.

However, following a failure to file the Statement of Information, a corporation is subject to “suspension,” and this will usually occur within three to five months of missing the deadline to file, which means that the legal right to do business in the State has been temporarily lost. Restoration (or “revivor”) of the corporation’s legal status can be costly and time consuming. And as long as the corporation remains suspended, it cannot sue anyone, and it may not be able to defend a lawsuit against it; it does not have the right to enforce the contracts it has made with others, such as the collection of rents, but it remains legally responsible for paying its own bills.

A suspended church has lost its income tax exemption under State law, and could be liable to the Franchise Tax Board for a minimum annual tax of $800. In 2016, the Franchise Tax Board was empowered to “administratively dissolve” any noncompliant corporation after a minimum period of time. After a second consecutive failure to file its required SI-100, a period of four or more years of nonfiling the SI-100, the FTB may notify a church that dissolution is pending, after which a church may be dissolved at any time by the Franchise Tax Board without further notice, which means the corporation no longer exists, and it would have to be reincorporated in order to conduct business legally.

Upon revivor or reincorporation, the FTB is not required to waive prior unpaid taxes – which can amount to $3,200 or more – but typically does this as a courtesy for nonprofits only because it would not have collected the tax under normal circumstances.

On another blog page, I have described and provided samples of schemes involving the filing of the Statement of Information. There are also a number of reputable and legitimate corporations that are approved by the Secretary of State to be a Registered Agent and receive legal filings on behalf of the other corporations that have requested their services. For example, Legal Zoom® charges $199 per year for their Agent service, and CT Corporation charges $319.

Church & Ministry Compliance Consulting is also approved as a Registered Agent by the California Secretary of State. But I have a very different attitude toward this responsibility. It takes just three to five minutes to file a church’s SI-100, and because the vast majority of churches will never be sued or have legal filings made which involve them, this is the only task an Agent for Service of Process will perform on behalf of most churches. So rather than exploit a church, when I act as the Agent for Service of Process and file the SI-100, I pay the $20 filing fee to the Secretary of State on behalf of the church, and then send an invoice for a total of $25, which covers my time to file the document.

With CMCC as your Agent, your church or ministry could have hundreds of additional dollars available to do its Kingdom work in the community over the course of the next two years. If I do receive a legal filing involving one of the churches for which I am acting as Agent, those documents would immediately be forwarded to the church, as is the Agent’s responsibility.

I can also assist with filing new Articles of Incorporation, amendments or restatements of the Articles, and merger and dissolution documents. Again, in each instance, I charge only a “convenience fee” to cover my time in addition to any State-required filing fee. The filing fee for Articles of Incorporation, amendments (such as name changes), or restatements is $35, which includes a $5 certification fee that identifies the official nature of the filed document. Filing merger documents is $105. There is no fee charged by the State for filing a formal dissolution document. There is no reason for a church to spend hundreds of dollars to have these things done, and I’ve helped dozens of churches and ministries to do these things in addition to filing SI-100s for more than 375 churches.

Thanks to recent upgrades to the Secretary of State’s Bizfile Online system, new incorporations and amendments or restatements of the Articles of Incorp0ration are approved within just a few business days when filed electronically online. SI-100s are filed instantaneously. As additional system upgrades are rolled out, merger and dissolution documents will eventually be accepted in electronic form and will be approved within a matter of a few days rather than the current processing time of several weeks.

So trust Church & Ministry Compliance Consulting to help you with these corporate compliance matters. For more information about our services as a Registered Agent, simply give us a call at 909.618.4841 or fill out the form on the Contact Us page.