How to Open a Church Bank Account
Opening a church bank account is one of the most important tasks when starting a church. 5 min read updated on September 19, 2024
KEY TAKEAWAYS
A bank account is a financial instrument that helps churches achieve their financial goals.
Churches have to present their governing documents when opening a bank account.
Churches must comply with state and federal laws when operating an account.
How to Open a Church Bank Account
A bank account is a financial tool that can help churches manage their finances differently than for-profit businesses. A bank account dedicated to the church helps ensure financial transparency, prevents the commingling of funds, supports accountability, and creates trust with the congregation. If you are running a church, it is essential not to miss these benefits.
Preparing to Open a Church Bank Account
Setting up a bank account for your church is akin to opening a business bank account. Like a business, you'll have to take several business documents to the bank to open your church bank account. However, some rules apply specifically to churches and religious organizations.
Articles of Incorporation
While state laws vary, churches and religious organizations typically have to file Articles of Incorporation for their church. Although the name of the form may vary by state, you may see the form going by one of the following names:
Articles of Incorporation Religious Corporations
Nonprofit Religious Corporations
Articles of Incorporation for Nonprofit
Certificate of Incorporation for Domestic Not-for-Profit Corporations
Domestic Nonprofit Corporation Certificate of Incorporation
EIN (Employer Identification Number)
You'll also need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service. An EIN is a nine-digit tax ID number the IRS provides to identify your tax account. This unique number identifies the church as a separate entity and will be used to start your bank account.
Bylaws or Constitution of the church
Some banks will require the church's governing documents, such as the church's Constitution or bylaws, to be present before setting up your bank account. These written rules should describe the church's organization, how it manages its money, and how it interacts with its members.
Meeting minutes authorizing the account opening
Most banks require meeting minutes or resolutions that authorize opening the account. In your minutes or resolution, you should clearly state the purpose and need to open a bank account. Include details such as the account's goals, benefits, and intended use.
Identification documents for authorized signers
You'll also have to include the authorized signer's full name, identification, and any relevant legal authority to open a bank account.
Choose the Right Type of Bank Account
Once you have all the necessary documents, ensure you select the appropriate type of bank account for your business needs. Consider the following options:
Checking account vs. savings account—A checking account is best for paying bills, purchasing, and managing the church's daily activities. However, a savings account might be the better option if the church is focused on meeting short-term and long-term savings goals.
Interest-bearing options—Churches are not barred from opening interest-bearing accounts. The passive income these types of accounts generate is an exception to the rules around Unrelated Business Taxable Income (UBTI). As such, this may be an excellent option for a church seeking to enhance its financial goals.
Select the Appropriate Bank
Selecting the right bank is just as important as selecting the right financial officer. You should compare local banks, credit unions, and online banks to find one that best fits your needs. Consider factors such as fees, services, location, and reputation when making your decision.
Steps to Open the Church Bank Account
Visit the Bank
When opening a church bank account, you may want to visit a local branch and speak to an associate about your church's financial needs. This step will help you establish a relationship with the bank's associates and learn firsthand about the unique products the bank offers. When visiting, if you are ready to set up your bank account, you should bring all the required documents along with you.
Complete the Application Process
Whether you decide to set up your account in person or online, you’ll need to take the following steps:
Fill out the new bank account application
Providing required documentation (e.g. r articles of incorporation, EIN, bylaws, meeting minutes)
Adding authorized signers
Initial Deposit
The initial deposit varies by financial institution. Some banks may require an initial deposit of $0, while others may require upwards of $1,000. The specific account that you pick depends on the church's needs.
Managing the Church Bank Account
Managing a church bank account requires transparency, accountability, and trust. To ensure effective management, consider the following steps:
Set Up Online Banking
Mobile and internet banking offers the convenience of managing the church's finances, giving the authorized signers access to essential tools and features. Setting up this feature for your church varies by financial institution. As such, you need to consult with your bank to access online banking.
Establish Financial Controls
Setting up threshold alerts, protecting against fraud, and implementing dual transaction controls may be good practices for safeguarding church funds.
Regularly Monitor the Account
Perform routine inspections to ensure that your church's finances are managed effectively. This means you should regularly review all your debits and credits to guarantee accuracy and identify any inconsistencies. Use your resources, likely your monthly bank statements, and compare them to your balance sheets to help manage your church's account.
Tips for Effective Church Financial Management
Budgeting and Financial Planning
Creating a budget based on your church's projected revenue can help ensure all its needs are met and that it stays afloat. Tracking annual expenses is also important.
Recordkeeping and Reporting
Churches must keep records of any income and expenses coming in and going out of their bank account. The IRS requires churches to keep books and records to show that they comply with the tax rules. The organization must be able to document the sources of receipts and expenses it reports on its annual return. For tax return purposes, the IRS requires it to be kept for three years from the date the original return was filed or two years from the date the church paid the taxes.
Churches may consider investing in a bookkeeper or bookkeeping software to help monitor and manage their financial health effectively.
Ensuring Compliance
Churches that generate income from activities subject to Unrelated Business Income Tax (UBIT) should comply with tax rules. While UBTI is permissible, churches should ensure that this income is not mixed with the money in their bank account for the religious institution. Churches should also ensure that they IRS Form 990-T when they generate more than $1,000 in revenue in any tax year. In addition to IRS regulations, churches should ensure they comply with their jurisdiction rules.
Conclusion
A bank account is a financial instrument that helps churches manage their money. Churches must choose the best account for their financial needs and ensure accuracy and transparency to satisfy their congregations. Opening a bank account is one of the first steps to helping churches maintain legal, tax, and community compliance.
Frequently Asked Questions
What kind of bank account should a church have?
A church should choose a bank account that meets the organization's financial needs and helps it achieve its financial goals. These needs and goals should be clearly stated in either the church's meeting minutes or its resolution.
Who should be a signer on a church bank account?
The person authorized to sign on a church bank account should be either its chief Financial Officer or a person appointed by the CFO.
What is the best bank for small churches?
The best bank for any organization depends on the needs and the goals of that particular organization. However, a small church may decide to consider a local bank or a credit union.