LLC stands for Limited Liability Company. A church can own an LLC, and an LLC can itself be recognized as tax exempt under 501(c)(3). What changes is how the IRS treats the entity for tax and for reporting.
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855-622-9009The IRS classifies the LLC by how many owners it has, and by whether the church elects otherwise.
A church relying on the church exception rather than a determination letter gets the same answer.
Where the IRS disregards the LLC, the church reports everything the LLC does as its own. The church lists it separately in one place only, on a schedule of disregarded entities.
An LLC that applies for its own exemption stops being disregarded. A church that files that application has elected corporate treatment for the LLC.
A church forms an LLC to serve a specific operational need:
Churches keep worship, ministry and routine operations in the church itself.
A church that puts a property inside an LLC does not change the tax character of the rent. Ask two questions:
Put both to your tax adviser before the lease is signed, while the services question is still negotiable.
One more applies only if the church elected corporate treatment: rent the LLC then pays the church can be taxable to the church under the controlled-entity rules.
Yes, where the church owns the whole LLC and the IRS disregards it. The IRS treats a gift to that LLC as a gift to the church, so the donor claims the same deduction, and the church applies the same receipting and quid pro quo rules it would for a gift made directly to it.
The IRS encourages the church to add one line to the receipt, confirming that the church wholly owns the LLC and treats it as a disregarded entity. Encouraged, not required: the deduction does not depend on it.
This covers LLCs formed under US law. The IRS did not address foreign ones.
Churches and religious organizations take several legal forms under state law:
Which form a church takes is a matter of state law, and the church settles it at formation rather than at audit.
A church that wants the liability protection has to run the LLC as a real entity:
A church that moves money between the accounts without paperwork invites the question of whether the LLC is separate at all.
If a church owns an LLC:
A church with an LLC still has to account for all of it.
A church that runs a property or a business through an LLC keeps the same records for it as for anything else it owns. We test the church’s records and the LLC’s when we run a CPA audit for churches. Contact Dimov Audit for further assistance with church audits.
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