The steadily changing landscape and makeup of the church in America, along with the financial uncertainties brought on by the 2020 global pandemic, have prompted some churches to weigh their long-term futures.

Even prior to the pandemic, many churches expressed concerns about their lasting viability due to decreasing membership, declining revenues, and, subsequently, budgets that cannot sustain existing church programs and ministries.

A merger may be a great option for keeping a struggling church alive in a new and fresh way. It can also be a great way to expand the footprint of an otherwise healthy church. No matter the circumstance, if a merger is to be pursued, it should be planned well. As an attorney, I have seen numerous outcomes. The goal, of course, is for it to go well. When it does, it’s because a host of considerations, both substantive and practical, made it possible. My four-part series is designed to guide you step-by-step (see sidebar to the left).

Church mergers are on the rise.

“Thanks in large part to the innovations of the multisite movement, [mergers] have become a viable, even positive, option for churches on the brink of closure—and for many that are doing just fine,” Christianity Today reported in 2019 in an article titled “The New Math of Church Mergers.” Add to this the financial concerns created by the ongoing pandemic and an even greater number of congregations might be seriously considering the merger option.

But what exactly is a merger and how is it done? While there are several legal options for how to properly structure a merger, the term merger is often used in a broad sense for how two (or more) churches come together as one. This may be done by a joint venture, consolidation, asset transfer, or other arrangement, but I have chosen the term merger for simplicity’s sake. As a general matter, there are three ways a merger can be done.

Under this option, both the assets and the liabilities of Church A are transferred to Church B, so it’s critical that there is great transparency between the parties. Additionally, tax laws governing exempt organizations do not allow the assets of a church to be transferred to any individual. Rather, they must go to another tax-exempt organization with a similar mission.

Under this option, Church A’s assets would go to Church B, the surviving entity. This is likely the concept most people visualize when they think of a merger. This option fits well under a circumstance where Church A is a smaller congregation with minimum assets and a much smaller footprint compared to Church B.

For this option to work, an asset purchase agreement would need to be prepared. The agreement would need to outline all of the assets and liabilities of Church A, along with setting a certain date to complete the winding down of Church A. Thereafter, any remaining assets of Church A would need to be legally transferred to Church B.

Unlike Option 1, no debts or liabilities are transferred to Church B, so in theory, the transaction between the parties should be more streamlined in that sense. On the other hand, most states have statutes requiring that notice be given to creditors and to the attorney general before an entity can dissolve. So, while the merger between the two churches may be less complex under this option, the pre-merger responsibilities for Church A are a precursor to the merger process. This option may be a realistic choice when Church A has no (or few) liabilities and mostly liquid assets.

This third option, legally known as a consolidation, “is sometimes chosen because of the reluctance of either partner to be the corporation that dissolves while the other survives,” notes the authors of The Nonprofit Mergers Workbook. It is also, perhaps, thought of as a way to create a fresh start for both congregations.

This was the option selected when I assisted two synagogues, each with long histories of more than 150 years, and respective congregations with strong legacies of family memberships. Each congregation wanted to preserve its individual history and identity while creating something new and more enduring for a successful future. (Just like in the Christian church, there are many other faith communities experiencing decreases in attendance, giving, and general participation, but those communities still possess unique dynamics and histories that they want to preserve while establishing futures that allow them to continue to exist.)

Mergers are a well-known reality in the for-profit world, but church mergers are too often overlooked by congregations as viable means of growing alliances. Unlike the hostile takeovers of a fierce competitor, such as those studied in business schools and depicted in Hollywood movies, the purpose of a church merger is more often about missionally minded matters.

For example, in one successful merger, an active seven-year-old church (Church G) with about 200 members was thriving. Having outgrown the school the church rented, the church’s leaders weighed buying a facility.

The founding pastor, a trained educator who loved building a strong curriculum of teaching in the church, found his greatest joy in leading Bible study. His church also had a thriving music ministry, which excelled, in part, because of his own musical abilities. However, he found the weekly Sunday sermon prep increasingly becoming a burden. He did it, but he didn’t feel it was his strength.

Just a few miles away, Church H owned a sizeable building led by a pastor who loved preparing Sunday morning messages, but he did not feel gifted at developing the teaching components of the ministry. The church had also been without a music ministry for months after its primary music leader left.

The two churches came together and found that where one lacked, the other had strength. I was able to assist in ensuring that my client (which merged into Church H) was able to exit its lease without penalty, advise the board on how to properly navigate the governance requirements for the merger, prepare the needed state dissolution documents, and overall navigate a high-stress situation.

Other circumstances or scenarios that might bring a church to consider a merger include the loss of the senior pastor; yearslong declining membership; financial struggles; and unexpected expenses, such as longstanding facility repairs, that swallow up budgets.

While a merger can be a sought-after solution in challenging times, it is also a great way to expand the existing footprint of a healthy church. For example, I’ve been able to help churches merge and create additional campuses, thereby scaling the growth of the church at a rate not otherwise likely. This expanding geographic footprint could mean connecting churches that are in relative proximity or expanding the church to add a location in another state or town.

Before merger discussions begin, the leaders from the churches involved should ask the following questions:

The Christianity Today article quoted earlier points to a 2016 Barna study finding that “89 percent of churches that underwent a merger or acquisition reported a positive result.” When a church merger is successful, the benefits can last for decades.

With a successful merger, the combined churches can experience one or more of the following benefits:

From the list above, two specific outcomes especially stand out.

One, expanding the demographics of the body of Christ has been a notable consideration for some mergers, especially as many churches age. Building an alliance with a younger church, which often includes younger church leadership, can help an older church construct a framework for succession and longevity.

And two, some churches have found a merger broadened their racial diversity. By example, a church located in the same area for decades recently revealed the community’s demographics had changed over time, but the congregation did not reflect those changes. The church boasted a 500-seat sanctuary, but drew only dozens, all of whom lived outside of the community. This church connected with a nearby congregation in need of larger worship space—one that also more closely reflected the community’s diversity. Together, both churches moved past their respective limitations and welcomed more people in the process.

As mentioned earlier, mergers have been a staple in the for-profit arena, and when done properly, a merger can be a great benefit to the merging churches. However, when done improperly or illegally, a merger can create difficult hardships.

One such example involves Church X, which existed for over 20 years and amassed over $1 million in liquid assets.

The pastor of Church X felt it was time for him to end his pastoral ministry and felt led to join forces with a local church that was thriving. He shared his vision with the governing board, and they unanimously voted in favor of a merger with the larger, local Church Z. In fact, the board of Church X transferred its assets to Church Z and invited its entire congregation to begin attending Church Z, just as the pastor and other leaders had begun to do.

Although Church X was a congregational church, the members were not given the opportunity to vote on the merger. Moreover, there was a state statute requiring notice to the membership when there is an intention to transfer all, or substantially all, of the assets of the church. Neither of these preliminary conditions were met, and the disgruntled members sued.

While the court decision in this case is still pending, the lessons from it are apparent: a merger is more than a spiritual coming together. It is a legal process with longstanding effects on all parties involved. The value of doing the needed due diligence upfront (see below) to ensure each required step is completed correctly is well worth the effort.

In another example, a denominational church combined resources with another church in its denomination. The two churches brought together their employees and changed their name to reflect a mutually agreed upon “new” church, believing they had completed a merger since the denomination had recorded the two churches as merged. However, confusion with state authorities and the Internal Revenue Service (IRS) followed, since the names and employer identification numbers (EINs) of the two churches remained on the books and now conflicted with the name and EINs of the merged church.

While there are missional reasons why a merger might make sense, choosing to merge should only happen after proper due diligence is performed. What is due diligence? Due diligence involves a process of closely and methodically reviewing the legal and financial situations of the churches seeking to merge.

Two intentional reviews can help achieve the needed vetting:

Due diligence should never be neglected for the good of all parties involved. Another compelling reason is this: As Jerald Jacobs notes in The Legal Guide to Nonprofit Mergers & Joint Ventures, “courts have held that the members of the governing board . . . can be personally and individually responsible if the results are untoward and the board members failed to closely examine the transaction.”

It is very important that each congregation have the proper neutral third parties help them make the best decisions. Typically, attorneys handle legal due diligence while accountants handle the financial due diligence.

Given the nature of the information potentially shared between the parties, the churches should reach a premerger confidentiality agreement before serious talks begin. At its core, this document should note the merger is an expression of the interests of the parties, and that they will enter into a level of previewing relevant information from the other, all while keeping any and all information received confidential. Additionally, there should be a written nondisclosure agreement between any key employees who may be a part of the early discussions.

Churches are merging today for many reasons. However, if a church decides a merger would not be beneficial, either because it isn’t appropriate, it isn’t a good fit, or the timing is not right, two or more organizations may find other ways to work together to share resources and better serve the community.

Those other opportunities could include a cost-sharing agreement allowing the churches to contribute costs for employees, administrative needs, and building operations; a joint agreement for the sharing of space for programming; connecting with a denomination that may have available property; or subleasing. (These options are detailed in Part 4.)

Declining membership and financial challenges, especially those prompted by the recent pandemic, have spurred some church leaders to contemplate a church merger. The potential benefits are many. But potential pitfalls also loom. Selecting the merger strategy that fits your circumstances and answers key strategic questions about your church and the potential partner church(es) are the basis for a merger that creates the best harmony, rather than the sounds of discord.

Also in this series:

Part 2: The Documents Needs for a Successful Church Merger

Part 3: Deciding Factors for a Sound Merger

Part 4: Finalizing a Merger

The steadily changing landscape of the church in America, along with the financial uncertainties brought about by the 2020 global pandemic, have prompted some churches to weigh their long-term futures.

Reflecting several years back on its survey about church mergers, the Leadership Network concluded:

Uniting to achieve a common mission is a common goal of a church merger, but how is it done? What actions should be taken once the decision to merge has properly been made?

While the missional and spiritual considerations in a church merger are of critical import to review at the very beginning of discussions, I have found that there is sorely little direction in the legal fundamentals of a church merger.

This church merger series serves as a primer of sorts, to share with church leaders what documents and information needs to be gathered for review, what decisions need to be made, and now, in this article, what actions must be taken to successfully complete a merger.

Depending upon the legal structure of the merger, a new legal entity will need to be formed, usually in the state where the church principally operates. Here are three important considerations:

Governance styles, as detailed in Part 3, differ from church to church. Do not assume all churches envision this the same way. With your specific style in mind, take the following actions:

During the due diligence stage, the merging churches should have compiled critical data about the respective churches’ real property interests and determined which property (or properties) would be maintained after the merger. As a result, and upon having the proper approvals from a governance perspective, the merging churches should take any of the following actions that apply to the situation:

As due diligence and discussions about the potential merger progress, evaluations about the ministry programs affected by a union—including the pastoral roles involved with those ministries—need to take place. Some pastors will remain aboard after the merger. On the other hand, due to any number of reasons, some pastors may not stay on after the merger. As it relates to these decisions about pastoral staff, the following actions will need to be taken:

Similarly, due diligence and discussions will reveal which non-ministerial staff remains after the merger and which ones do not. The following actions will need to be taken:

Matters related to theology likely were discussed before the merger reached this point. However, documenting the tenets of faith of the merged church provides an easily reviewable way for members to know that the joining churches agree on underlying theology.

Please use my helpful checklist to ensure that you note other transitional issues. These include other insurance matters, updating state and IRS records with the merged church’s new information, and taking time to plan an appropriate celebration to commemorate the merger.

On the softer side, it will be important to ensure that the merged congregations feel equally welcomed into the merged church, even if one of the churches is larger and/or financially stronger than the other. Church leadership will want to be very intentional in building opportunities for members to connect with each other and serve together.

Just like in a marriage, the union isn’t perfected the moment the couple says “I do.” A couple becomes one through a wedding ceremony, but truly bonds together emotionally, physically, and spiritually over time. The same is true for a merged church. The merging churches must be intentional in bringing about the bonding of the leadership as well as the congregation. Training and staff building activities are critical at this stage.

Once the merger has been finalized and the congregations have come together under one umbrella, things move from hypothesis to reality. The process of evaluating and ensuring that things go well post-merger is called merger integration. Assuming all parties to the merger have done their best to prepare for the merger, you’ll be able to see how things actually work after closing.

This is the time to ask a number of pertinent questions: Are there unexpected redundancies in church programs? How aligned is the pastoral team to the merged church’s vision and conduct? How are the merged church’s finances? Did weekly attendance increase relatively similarly to the size of the combined congregations before the merger? How effective has it been to combine IT systems? Is the current church structure suitable for the merged church? These key questions will allow the merged church to evaluate what additional tweaks and changes should be made to ensure continued success.

In this evaluation stage, it will be important for all involved in the merger to recognize that the merger by definition will mean that the merged church will look different from any of the churches as they existed separately. The temptation to hold onto the past can be averted by considering what brought the parties to the table in the first place.

While a merger may have huge benefits, you may have concluded—upon reading this series of articles—that you’re not interested to go forward with this option. If a church doesn’t believe a merger is appropriate, or the timing is not right to merge, two or more churches may find other ways to work together to share resources and better serve the community. Those other opportunities could include the following.

Let’s say one church has resources another church needs, such as office space, equipment, facilities, or even staff. The church that has needed resources could enter into a cost-sharing agreement with the other church.

For this to work, it’s important that the churches have similar missions and purposes. Further, and as the saying goes, good fences make good neighbors, so it is critically important the churches adopt a well-drafted agreement. Such an agreement would include the purpose of the arrangement, the term, payment structure, and also provide for a system of how any conflicts should be resolved.

In this instance, two or more churches would remain autonomous, yet identify one space they could use jointly—at different, agreed-upon times—and split the cost. Thus, each church could use the space to expand its programs.

Again, a well-drafted agreement must be adopted by the two churches. In such an agreement, the churches want to make clear who is allowed onto the space, when the churches get access to the space, who has the responsibility to maintain and clean the space, how insurance coverage would work, and the payment structure.

I once helped to bring together a denomination that had a surplus of property and a local church that was bursting at the seams with people and programs. Specifically, I assisted the denomination in leasing some excess property to the local church so it could expand and create a new campus utilizing one of the denomination’s unused church properties.

If your church owns a facility that is underutilized, you may consider subleasing a portion of the space to another church. Of course, you must confirm that your current lease (if you are not the owner) allows for such an arrangement. And work with a competent professional in preparing the sublease terms.

A sublease arrangement can also be the first step in seeing how a church operates and whether it may be, at a future time, a good merger partner.

After journeying with me through this four-part series, you have learned the nuts and bolts of a church merger, the merger options, the documents and information needed to evaluate a possible merger, and how to go about the process if a merger is right for your church.

Perhaps, at the end of it all, you have decided that a merger is not right for you (or is not right at this time). In either case, using the downloadable checklist and making note of the legal and financial ways to operate as a best practice will position your church for organizational strength.

Keep in mind, though, that a successful merger does not happen by chance.

A successful merger is one where due diligence produces a stable outcome. Each step is important, including the document-gathering stage, the decision-making stage, and the final-steps stage detailed in this article.

I have adopted the saying that the greatest room is the room for improvement. Whatever way a church can position itself for the greatest amount of eternal good is worth the effort. A merger may be the tool for churches to emerge in a new and exciting way.

Also in this series:

Part 1: Is a Merger the Right Next Step for Your Church?

Part 2: The Documents Needed for a Successful Church Merger

Part 3: Deciding Factors for a Sound Merger

A church merger involves a complex legal strategy. But the presence of complexity should not steer leaders away from it. Bill Gates, addressing the 2007 graduating class at Harvard University, noted complexity—not apathy—represents the true barrier to lasting change. “To turn caring into action, we need to see a problem, see a solution, and see the impact,” he said. “But the complexity blocks all three steps.”

Similarly, church leaders who care about the future of their church, and who see emerging challenges confronting it—whether an aging membership, shifting demographics in the surrounding community, diminishing revenues, and/or dilapidating facilities—may see a merger as a fruitful solution with potential long-term and lasting impact.

That means they must embrace the complexity that comes with a merger. Since the window of opportunity for a merger inevitably closes, embracing the complexity requires taking action. And taking action means the right leaders are making numerous key decisions.

In an article “When Churches Merge” for Leadership Network, Jim Tomberlin and Warren Bird aptly state that “[m]ergers are complicated, and many issues must be addressed when undertaking one.” The authors go on to offer a number of questions leaders should ask about the decision-making involved. Here are some the most pertinent questions for the purpose of this article:

It is critically important to ensure that the right persons or leaders are making the decisions. The ones responsible for decision making should be based on a church’s polity—its governance structure. Generally speaking, the power to make decisions takes one of three forms:

That’s why this decision comes first. If the churches considering a merger determine that they cannot unify in these three key areas, then there would be little reason to move forward.

Jeremy Roberts, in his article 4 Things Every Church’s Vision Should Include, states that the vision for a local church should answer this question: “What does God want us to do?” Roberts says that the four things vision must include are: (1) the commitment to reach lost people; (2) demonstrating care for the members of the church; (3) training the congregation; and (4) sending members out to execute the vision for Jesus.

How this vision is manifested varies greatly from one church to the next, and it is critical to establish an aligned vision that serves to point the merged congregations to “true north.”

The church’s strategy is the plan it uses to reach its vision in a predetermined time. Do each of the churches involved in the merger have a strategic plan? Do these strategies reasonably resemble the priorities of the other? Is each church making significant progress in reaching its strategic goals? Will the merger push the strategic plan forward? It certainly should.

Now to the element of church culture. The culture of the church, says Samuel R. Chand, is best understood in the statement: “This is how we do things here.” In his book Cracking Your Church’s Culture: Seven Keys to Unleashing Vision & Inspiration, Chand shares his belief that the “strongest force in an organization is not vision or strategy—it is the culture which holds all the other components.”

If two or more churches are to come together in a merger, they have to be certain that there are central meeting points of their vision, strategy, and culture. Indeed, how each church “does things” will be a line that flows through every other decision that needs to be made in the merger process.

During due diligence, the churches must determine the name of the merged church. Options include continuing one church’s name, creating a new name that includes parts of both church names, or using a completely new name.

As a legal matter, confirm that the desired name is available for registration with the secretary of state before finalizing the selection of the name.

Your leaders should also review options for website addresses and other intellectual property considerations affecting the name chosen, such as whether there is already a filing with the United States Patent & Trademark Office (USPTO) that would prohibit the use of a logo, mark, or design associated with your chosen name.

The USPTO recommends that you check its site first to make sure someone hasn’t already registered a similar mark. You wouldn’t want to mistakenly infringe on another church’s mark or website address, or go through the trouble of deciding on a name only to find out it is not available in your jurisdiction.

Again, based on the information learned during the due diligence stage, a decision should be made as to which location (or locations) will be maintained after the merger. Options include using space already owned or leased by one of the churches or selecting a place new to all merging churches.

For example, one of the two merging churches owns a facility that can accommodate both congregations. The other church is renting a smaller space under a lease that is about to expire. It would likely be best for the merged church to come together at the larger, owned property. On the other hand, if the church with the smaller space still has many years left on its lease and a provision that prohibits the lease from being transferred, your legal counsel may advise you to delay the merger until the lease is closer to its expiration, or to try to negotiate an exit strategy with the landlord.

Relatedly, during the due diligence process, you should check to see if there are any personal guarantees under the lease or in any other contract. This information could be instructive when considering your options.

Consider this example: I recently represented a church that would be subsumed in the merger. The pastor of that church had personally guaranteed a lease that was worth more than $3 million over the life of the lease. Walking away from the lease would have severely harmed the pastor’s credit (not to mention his good name in the community), so that was not an option. Instead, we chose a strategy that would allow for the lease to be paid out over the obligated term while using the leased facility temporarily as an added campus for the merged church.

Another option that is increasingly useful is merging into one entity with multiple permanent sites. As referenced in the book Better Together, Making Church Mergers Work, it is estimated that “1 out of 3 multisite church campuses come as a result of a merger. Growing churches are utilizing mergers as a fast and effective way to go multisite.”

Also, the online campus has become an important addition to physical locations, catapulted by the reality of how COVID-19 required churches to adjust the definition of “meeting together.” Leaders consequently need to decide how their respective online presences—through a website, email communications, and social media—will come together.

“The most visible and delicate staff role to discuss in a merger transition is that of pastor,” say the authors of Better Together, Making Church Mergers Work. “What will happen to our pastor is also one of the first questions to address in the merger conversation.”

Because of the nature of the pastoral role and the many considerations unique to each congregation, there is not one answer to this important question; however, I will look at three possibilities.

The first option is to have the lead pastors of the merging churches serve as co-pastors. This would allow the existing pastors to retain top leadership roles and avoid the struggle of having to decide which of them will become lead pastor of the merged church. While this option provides a sense of “ease” by avoiding having to choose one lead pastor, it simultaneously creates a scenario that I rarely have seen succeed.

The challenges with having two lead pastors may include confusion among the staff as they try to figure out who to look to for needed direction; slowed or stalled projects while decisions get stuck at the senior leadership level; frustration among the leaders themselves, who are often used to a certain leadership style; and the optics through the congregational lens that look as though things are not settled at the senior leadership level.

Another option could surface if one of the pastors of the merging churches decides to use the merger as the opportunity to retire or otherwise minimize his involvement. This has the effect of making a clean line of the “before and after” merger scene, but it can add to the complicated feelings members may already have when a merger is announced.

The final and most common option I have seen is for the leadership of both churches to examine a matrix of considerations regarding the pastoral leaders—education, years of experience, size of church, effectiveness in church growth, connectedness in the community, and so on—with an ultimate decision on which of the merging church pastors will serve as lead pastor.

In my experience, honest discussions can lead one of the pastors to feel the call to shift away from the lead pastor role and into a new role. This new role may be something within the merged church (examples I have seen include outreach pastor, executive pastor, campus pastor at the location added by the merger, and pastor of global outreach). On the other hand, the shift could be to a new vocation completely outside the walls of the church (examples I have seen include college professor, entrepreneur, and writer).

In any event, as the saying goes, good fences make good neighbors. It is important for everyone to know what role each of the former lead pastors will take and for this to be communicated clearly with the congregations of each church when the merger is announced.

In a similar manner, the merging churches will need to determine what staff will continue and in what roles. If the merger does not create significant duplication of staff and finances allow for it, it may be best to keep staff for up to three years as the merged church takes root.

In considering staff, you should examine both employees as well as independent contractors. Since many churches have workers in both categories, it will be important to know this in order to get a complete picture of who is on payroll and what services they provide. And like the lead pastor role (and as it applies to specific roles), considerations might also be given to such factors as education, years of experience, size of church, effectiveness in church growth, and connectedness in the community.

I have seen great success achieved when merging churches have complementary ministries. For example, one church is committed to international missions and the other church is committed to local outreach. In such instances, there may be only a limited duplication of efforts.

On the other hand, if the merging churches’ ministries are duplicative, the leaders must decide what ministries to continue and who will lead the new and continuing ministries. Most churches have a youth ministry, for example. If two churches merge and both have youth ministries, how will this ministry change and how will the youth leadership change?

In my experience, many churches strive to integrate both the leadership and the programs without eliminating anything (or anyone) for the immediate future, if budgets allow. Many times, however, the merger documents indicate that this integration is for a limited evaluation period (usually between 12 months and 36 months) at which point the situation will be reevaluated and additional changes made.

What governance style will the merged church follow and who will choose the governance style? As earlier referenced, the current governance documents are illustrative as to who will be on point for each church to make the merger decision. The same group of decision makers will be responsible to determine the governance style of the merged church. Once the decision is made regarding governance style, it may be necessary to update the church’s bylaws as the governance document. This is discussed further in Part 4 of this series.

In my experience, mergers that opt for board-led governance most often blend board members from each of the merging churches. Generally speaking, the smaller church (which is likely the church merging into the larger church) would take a smaller number of the board seats than the larger church. In any event, the blended board provides both churches with a proverbial seat at the table, which is critical for the ongoing building of trust.

Let’s consider one other possibility. What if a congregational-led church and a board-led church is considering a merger? This could be a very complicated situation fraught with many thorny issues. If a decision about which governance style to use in the merged church cannot not be reached, it could be a “deal breaker.” Further, trying to reach an agreement that does not respect each church’s governance style (as laid out in each church’s governing documents) could be difficult.

The key is transparency and good communication from the beginning so that the parties are aware of differing governance styles and mutually commit to doing the work necessary to harmonize those differences. This is a key area of variance that will need to be aligned before the merger gets finalized.

Key decision makers must decide how and when to share the merger news internally, locally, and beyond. On the front end, while the decision makers are still “kicking the tires,” so to speak, I have advised that communications regarding the possible merger remain confidential and shared only on an as-needed basis.

This commitment to confidentiality should be made in writing via a nondisclosure agreement (NDA). Such an agreement would allow the churches to negotiate in good faith regarding the potential merger while committing to keep in strict confidence the potential merger and any/all information received in the course of merger discussions.

While the initial NDA would be between key and pertinent leaders of the merging churches, your attorney may recommend that any staff members who will have access to merger information also sign an NDA. You would only want to involve staff in NDAs on an as-needed basis since the more people who sign NDAs, the more people who know of the potential merger. Staff members can sometimes feel concerned about whether a merger may result in job loss and may have less motivation for keeping information confidential if they leave the employ of the church.

When the merger decision has been made, it is important to share this information in a positive and measured way. Of course, it is most important that the membership of the merging congregations be the first to know, and a detailed communications strategy be developed from there. Commonly, the merger of larger churches may require a more detailed and expansive communications strategy.

It is important to end one thing well before moving to the next. While it is exciting to begin plans for the newly merged church, it is critical to also plan how members can say goodbye to their respective churches, including the ministries that are either changing or dissolving, as well as people whose roles are changing or phasing out with the merger.

Many see a proper ending as the precursor to a good new beginning. Giving voice to the fact that the merger may be hard on some—as they leave behind the history of something as personal as one’s church—can provide the needed catharsis.

Decide how to honor the church formed through the merger. Perhaps the respective churches provide a beloved ritual or item. Perhaps some type of ceremony commemorating the union is also hosted. I have also seen beautiful video presentations that honor the history, leaders, and staff of the merging churches. Regardless of what gets pursued, make certain to honor the newly formed congregation and establish new shared traditions and culture.

Leaders should be keenly aware of what merger decisions need to be made and who has the legal authority to make such decisions. And by thinking through and following through on the above questions, these key decision makers should be ready to take the specific actions steps.

Also in this series:

Part 1: Is a Merger the Right Next Step for Your Church?

Part 2: The Documents Needed for a Successful Church Merger

Part 4: Finalizing a Merger

In the first installment of this four-part series, I shared that church mergers are on the rise. As an attorney whose practice focuses solely on the representation of churches, I see churches opt for this useful legal strategy as a viable means to sustain a stymied church or to further grow a healthy church.

Mergers will be an especially important consideration as many churches move toward a post-COVID-19 existence. As David Kinnaman, the president of Barna Group, said regarding the 2020 state of the church, “[t]he challenges of leading the people of God are formidable and still the opportunities for community transformation and personal flourishing are surprisingly bright.” I believe that church mergers are such a bright spot. To be successful, however, the decision to merge must begin with earnest prayer and deep spiritual contemplation. But it cannot stop there. The most successful mergers have a healthy recognition of the legal, accounting, property, and other temporal—but important—considerations.

While the legal nuts and bolts of a merger are similar—whether combining two businesses or two (or more) churches—the unique missions of the churches, the special relationships between the people in those churches, and the churches’ tax-exempt statuses make the process distinct from the run-of-the-mill corporate merger.

A church merger legally combines two or more churches into one remaining entity.

As a general matter, and as I explained in Part 1 of this series, there are three ways a church merger can be done:

Deciding which merger strategy to use is made on a case-by-case basis and can be best determined as a result of due diligence. Due diligence is a systematic process involving detailed reviews of the legal, accounting, and other relevant information from each of the merging churches.

A high level of transparency is needed since the decision to merge is likely one of the most significant decisions that church leaders will make. While it can seem easier to bypass due diligence in favor of a “handshake,” to do so would be to the potential peril of all parties. The process of due diligence can take many months to complete and encompasses the areas detailed in this article and the remaining two articles in this series.

Read more about how to approach due diligence in Part 1.

For the document-gathering process—utilizing the provided checklist—prioritize gathering the following.

The articles of incorporation is the document that must be filed with the secretary of state in order to form the legal entity. It must be filed in the jurisdiction where the church is located, or as may be the case for multisite churches, where the central organization is located. All states and the District of Columbia have their own requirements as to what must be included in articles of incorporation. Generally speaking, each state requires:

Any articles of amendment filed with the state must be gathered as well. Articles of amendment (which serve to amend or otherwise restate the articles of incorporation) may be filed when a church changes its name, broadens or otherwise alters its purpose, or amends other salient details of its operations.

The formation documents are particularly important during the merger process because each party should know the legal status of the other and be certain that each side is in good standing with the state where it was formed. As a general matter, if a church is not in good standing, any merger documents will be rejected for filing until the issue or issues get resolved.

Lastly, it is important to use the church’s legal name in all merger documents, which should be confirmed by reviewing the official corporate records.

Bylaws are the internal governing documents outlining how the board will operate, its term, and its process for elections, as well as the roles of officers, the qualifications of officers, and other salient details guiding internal operations.

Unlike the articles of incorporation, bylaws are generally not filed with the state. Because of this, it is particularly important that a church diligently keep its bylaws in a safe place, including a current paper copy. Reviewing the bylaws is of critical importance during the due diligence period. This document will confirm who has the authority to authorize the merger, and what governance process is required. For example, is a two-thirds vote of approval by the board required or a majority vote of the congregation? How much notice is required before a meeting on the merger question can be held?

A church constitution outlines a church’s tenets of faith, including matters like baptism, the sacraments, marriage, and so on. In the context of a merger, the constitution can provide great insights into the compatibility of the churches in terms of religious beliefs.

Policies and procedures in the context of church operations includes employment policies, child protection policies, sexual harassment policies, social media policies, expense reimbursement policies, and so on. These types of policies form the backbone of each church’s operations and, if they exist in good form, can save a lot of time and effort in avoiding the proverbial recreating of the wheel during the merger.

An employer identification number (EIN), also known as a federal tax identification number, is assigned by the Internal Revenue Service (IRS) when a Form SS-4 is completed and submitted by an authorized individual on behalf of the church. Just like a Social Security number identifies an individual, an EIN identifies a church.

Usually, when the church opens a bank account, this document is requested by the bank to ensure that the funds are held for the benefit of the church. This number is also used to identify any payroll taxes that may be payable (which is generally the case when a church has employees), and the EIN is listed in any Form 1099s issued by the church to independent contractors (if it has any). Verifying each church’s correct EIN will be important as merger documents are prepared.

Gather all tax- and exemption-related records, including IRS letters of determination, state sales tax certificates, and real property exemptions.

While churches are not required to file Form 1023 for recognition of exemption under Internal Revenue Code Section 501(c)(3), many churches do so in order to receive the official IRS letter of determination to plainly show donors the church’s exempt status.

Moreover, as state and local governments struggle with their fiscal bottom lines, they are increasingly raising the bar on churches and other nonprofits whose tax breaks are seen as taking away from their coffers.

In many (if not most) jurisdictions, local governments are requiring churches to provide their IRS letters of determination with applications for other tax exemptions, such as sales tax exemptions, property tax exemptions, and other local tax exemptions.

Each church involved in the merger should gather a copy of deeds to all real property it owns. If your church doesn’t have its property deeds, a request for them usually can be made to the jurisdiction where the property is located.

Also compile any records related to any deeds of trusts, mortgages, or other related property records.

A successful merger can be a great way to extend the impact of two churches with similar missions by coming together under the strength of one name. Having gathered and reviewed the critical due diligence information as outlined above, I will next—in Part 3—review the critical decisions that church leaders will need to undertake as they consider the possibility of a church merger.

Also in this series:

Part 1: Is a Merger the Right Next Step for Your Church?

Part 3: Deciding Factors for a Sound Merger

Part 4: Finalizing a Merger