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FAQ on Incorporation

FAQ on Incorporation
October 30, 2009

Why incorporate?

Primarily to deal with property.  Since the Meeting is not incorporated and has no legal identity sufficient to hold title, we had to form a "title-holding trust" to legally receive the 2008 gift of land.  If the Meeting incorporates, the title-holding trust will dissolve itself and turn the title over to the corporation.  Incorporation may also make it more likely the Meeting could receive a property tax exemption for the land. 

Liability is another reason.  Our current officers, Meetinghouse trustees, and title-holding trustees, along with everyone else in the Meeting, may be individually liable for an injury alleged to have been caused by the Meeting.  If someone wanted to sue the Meeting, the suit would have to name individuals, since the Meeting itself has no legal identity.  (The Meeting does have liability insurance, which covers everyone who acts on behalf of the Meeting, but the insurance might not cover a really large judgment.)  If the Meeting were incorporated, only the corporation would be liable (the NM nonprofit corporation statute says "The directors, officers, employees and members of the corporation shall not be personally liable for the corporation's obligations.").

Doesn't incorporation just entangle us with the state?

For better or worse, the Meeting is already entangled with the state.  Just owning property in New Mexico has required us to conform to certain state requirements (the title-holding trust, applying for a property tax exemption).  The Meeting has also had a state tax ID number since about 1992 in order to take advantage of the exemption from paying Gross Receipts Tax on certain purchases.  

We're also already entangled with the federal government: we conform to IRS requirements to receive tax-deductible contributions and not pay income tax, and around 1992 the Meeting acquired an EIN (Employer Identification Number) from the IRS which we must use on our bank accounts and on reports to the IRS on payments to our First Day School teacher and to the person who cleans the Meetinghouse.

If we incorporate, what exactly does the state require of us?

Very little, actually.  Setting up the corporation requires only that we tell the state 1) our corporate name, 2) how long we expect the corporation will exist, 3) its purpose, 4) who will be our "registered agent" and his or her address, and 5) who will be our incorporator, directors, and officers (which we can call whatever we like, as long as one of them has the function of recording and maintaining the corporate records).  The state requires us to have bylaws, but the state doesn't require a copy.  Finally, we have to pay a $25 filing fee, make an initial report (paying a $10 fee) and then annual reports (paying a $10 fee with each).

What is the difference between Articles of Incorporation and Bylaws?

Articles of Incorporation tell the state five basic things about our corporation (see paragraph above).

Bylaws are our rules for managing our corporation.  The state requires us to have bylaws, but it doesn't ask for a copy or even say what they must contain beyond "The bylaws may contain any provisions for the regulation and management of the affairs of a corporation not inconsistent with law or the articles of incorporation."

What is a Registered Agent and why do we need one?

The state wants to know how to find us: "The duty of the registered agent is to forward to the corporation any notice, process or demand that is served on the corporation."

How does incorporation affect the Meeting's tax status?

It has no effect on the Meeting's federal tax status.  The IRS automatically grants 501(c)(3) status to churches, which means that donations are income tax-deductible to the donor and income tax-exempt for the church.  Churches may choose to apply for a 501(c)(3) determination letter, but they are not required to do so.  (The Meeting has not applied; if we were to apply, the filing fee would be $850.) 

It appears that we have been for some time viewed by the state of New Mexico as a church, so our tax status should not be affected by changing our legal status to a nonprofit corporation from an "unincorporated association" which has never filed articles of association and therefore is not recognized by the state.

New Mexico nonprofit corporations are eligible for exemptions from income and property taxes and from paying Gross Receipts Tax on certain purchases.  For determining what exemptions might apply to a particular organization, New Mexico's published official information expects that the organization will submit an IRS 501(c)(3) determination letter (which we do not have) as evidence of its status.  (Presumably evidence that we are a church sufficed in 1992 when the Meeting was issued the forms for exemption from the GRT.) 

The New Mexico Attorney General maintains a Registrar of Charitable Organizations that solicit donations.  Churches are not required to register, but the AG recommends that churches request an exemption from registration so he can certify their status (our Meeting has not requested an exemption). 

Are other monthly meetings in IMYM incorporated?

A number are, mostly because of property.  Albuquerque Monthly Meeting has been incorporated for 51 years.  Interestingly, the South Santa Fe Worship Group is also incorporated, again, mostly in order to deal with property.

For more information:

New Mexico Statutes on Nonprofit Corporations

New Mexico Attorney General on Forming a Nonprofit Corporation

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