CORPORATION SOLE v 501(c)(3)
Let's begin this comparison by citing some of the features of the Religious Organization - otherwise known as the 501(c)3 and compare it with the Corporation Sole:
1. A Church, which is defined as the Body of Christ, chooses to voluntarily remove itself from its rightful Head, the Lord Jesus Christ and place itself under a foreign head, the State of (Insert whatever State you live in) and the IRS when it applies for 501(c)3 status.
2. As a Church, it had all the Constitutional Rights guaranteed by the United States Constitution: Freedom of Speech, Press, Assembly, Right to Due Process, Privacy, etc. Once the decision was made to legally change the status of the Body of Christ from Church to "Religious Organization" [i.e. 501(c)3 under the Internal Revenue Code], it lost every one of those rights and now only has privileges - temporary advantages granted by the state and can be revoked at the will and pleasure of the state - should the "Religious Organization" violate "Public Policy" as did Bob Jones University a few years ago.
3. As a "Religious Organization" [ 501(c)3] - granted said status by the Internal Revenue Service, it has very restricted and limited actions: a) it must be accountable to the IRS every year and file the appropriate form to insure said accountability to the Government; b) its funds are restricted in use - they cannot be used for "political" purposes - the definition of "political" being highly subjective and dictated by the Government; c) doctrines of the "Religious Organization" must be in conformity with stated "Public Policy" of the Government - otherwise, the nonprofit status is revoked by the IRS; and finally, the worst feature of all: the Church of Jesus Christ is now subject to a GODLESS HEAD - the State and the IRS - all done voluntarily since IRS Publication 557 is quite clear: Churches [not "Religious Organizations"] are not required to become a 501(c)3 in order to have contributions and donations become tax deductible.
4. Churches need to have some kind of legal existence in order to hold property and to conduct the business affairs of the Body of Christ. By far, the best vehicle to accomplish these purposes is a Corporation Sole. The Corporation Sole has been used since the signing of the Magna Charta to hold property and to conduct business in the name of the Body of Christ. Established by common law contract, it maintains the separation of Church and State guaranteed by the First Amendment to the Constitution. A Corporation Sole is not formed by the Government, is not granted legal status by the Government, nor is it held accountable to the Government for its day-to-day operations and/or financial dealings.
5. The Corporation Sole is mandatorily excepted from filing tax returns pursuant to 26 USC § 508 and 6033.
6. The Corporation Sole reserves all of its rights under the Constitution and is faithful to its calling as a witness to its rightful Head, the Lord Jesus Christ.
7. The 501(c)3 has NO IMMUNITY from government inspection of books and records. The Church, under a Corporation Sole, has all the privileges and immunities [i.e.; 4th and 5th amendment protections of privacy of books and records as well as right to remain silent].
8. The 501(c)3 has restrictions on hiring and firing within the framework of "Public Policy [i.e.; cannot refuse the hiring of homosexuals who apply for work with the "religious organization"]. Conversely, the Church, under a Corporation Sole, has complete authority to hire and fire whoever it desires to work for the church.
9. The 501(c)3 can be represented in court ONLY by an attorney. The Church, under a Corporation Sole, can be represented by the Overseer and an attorney as co-counsel or just by the Overseer by himself. Once an attorney has been hired by the 501(c)3, the court has been granted jurisdiction over the case.
10. The 501(c)3 religious organization must apply for and be granted legal status by the IRS and the domicile state. The Church, under the Corporation Sole, has its status granted by its Head, the Lord Jesus Christ. Once the Church surrenders its Headship to the IRS and the State, it has lost all its rights, privileges and immunities under the Constitution of the United States.
11. The 501(c)3 must withhold and collect taxes from its employees and forward to the government. The Church, under the Corporation Sole, has the option of not withholding and collecting taxes from its employees and submitting same to the government.
12. In summary, the Church maintains its spiritual integrity by remaining a Church under the Corporation Sole. By applying for, being granted and operating under 501(c)3 status, the Church has relinquished its freedom under its Head and has chosen to be under a different head: the government.
The following is a report of a discussion of Corporation Sole
for the financial services and asset protection for Professionals:
Recently, there has been a lot of information and misinformation passed around among estate planners and investment consultants regarding the Corporation Sole. Corporations Sole have been around for over 450 years, so they are not a "new kid on the block". Corporations Sole are used primarily for holding and passing the title for property belonging to a church, religious society, or charitable organization. Two examples of well-known Corporations Sole are the Brothers Winery and the Sierra Club. Because you will be asked about Corporations Sole, if you haven't already been asked, I'll share a little background information on Corporations Sole and you may be able to decide if or how they fit in with the estate planning strategies that you provide for clients. This discussion is the result of five years of studying Corporations Sole, and writing Corporations Sole for dozens of clients. In this learning curve, I have studied the documents written by most of the current Corporations Sole gurus. In various ways and to varying degrees, I find that there is a general lack of understanding of the historic usage of the Corporation Sole, even among the so-called "gurus". There is also a lack of understanding of the statutes regarding Corporation Sole that results in most cases in giving away of the potential benefits gained by this unique form of corporation.
People use corporations when they need a means of limiting liability. Normal corporations are a creation of the state, and begin their existence on the date that the state incorporates them. Normal corporations owe their existence and allegiance to the government. Corporations "live" forever unless limited by their own Articles of Incorporation. Normal corporations require several officers, they have boards of directors, stockholders, annual fees, annual reports, and operate under many statutory regulations.
People use trusts when they need a means of protecting assets. Trusts are used when one person entrusts another person with some valuable asset or a right. The asset or right must be sufficiently identified for title to pass to the trustee and title must actually pass to the trustee. The asset or right, therefore, belongs to the Trustee and is not returned into the ownership of the original owner [trustor] or a designated beneficiary until the trust terminates on a stipulated date. The reason why assets placed in trust are not liable for claims against the trustor or for taxes of the trustor is because the property really does not belong to the trustor. Trusts are not perpetual and they are limited by statute to a certain number of years [20, 30, 99 years, etc.]. There are laws against perpetual trusts in virtually most, if not actually all, jurisdictions.
Wouldn't it be nice if we could have an organization that has the advantages of limited liability of a corporation, without the regulation, without the multiplicity of offices of a corporation, for an organization that the government does not create (therefore the organization does not have its allegiance to the state), and also allows the organization to function as a perpetual trust in order to protect and convey assets for many generations? Carefully reading and comparing the State Corporation Sole statutes, a good Corporation Sole instrument, and the "Certificate of Existence" [not: "Creation" issued by the Secretary of State], show that the Corporation Sole can be everything that is listed above. Are all Corporation Sole documents equally serviceable? Many documents that do meet a State's requirements are so poorly written that they give away all of the advantages recognized in the first amendment's "free exercise [of religion]" clause. Some Corporation Sole documents even attempt to form a contract with "the ALLEGED state of [State]." Under UCC 1-203, Good Faith is a requirement in all contracts. Because it is not possible, in my opinion, to operate in good faith when one is alleging that the other party may or may not exist, then that kind of Corporation Sole instrument is inherently flawed and the courts will eventually walk right through them and seize all of the assets that the corporation accumulates. I have friends who (in the past) had organized a church under a Corporation Sole and promptly applied for the IRS 501 (c)(3) status. Applying for permission for exemption under 501 (c)(3) voids the natural immunity against regulation found in the First Amendment to the Constitution as well as the Internal Revenue Code, section 508. In spite of some sad examples of poor planning, there are also some very solid Corporation Sole instruments that do hold up in the courts.
Being a "Corporation," the Corporation sole is by nature a form of limiting liability within the assets of the corporation. The State statutes on Corporation Sole stipulate that the property is held "in trust" for the membership of the organization. This makes this kind of corporation function as a trust! In fact, the Oklahoma statutes describing Corporation Sole are found in that state's trust successor provisions, with a waiver of the "rule against perpetuities".
One feature of religious societies is that they can accept vows of poverty by their members [Re; monks, nuns, priests and Overseers]. The IRS recognizes these vows of poverty. For a small part of the IRS information on Vows of Poverty, look at pages 3 and 8 in IRS Publication 517. When one is under a vow of poverty, the physical objects in their possession are not their own, although it may be their job to look after and use those objects. Thus, when you see a Catholic Bishop being moved between a cathedral and a golf course, he may be carried in a stretch limousine, but he is still under a vow of poverty that is recognized by the IRS and he is not questioned or bothered by the IRS. Virtually, all Catholic dioceses are organized as Corporations Sole.
One guaranteed way to fail in an attempt to avoid taxation is to work for W-2 wages and donate 100% of your income to a Corporation Sole of which you are the overseer. In cases like this, there is a contractual obligation not to exceed a certain percentage of one's income in charitable donations. Also, the IRS justifiably claims that the Corporation Sole is an "alter ego" of the W-2 wage earner, and liens, levies, and seizes all of the assets of the Corporation Sole. The best way to avoid this scenario is to never work for W-2 wages, but if you do, stay within the guidelines of the IRS when making donations to the sole. You may use other tax strategies for lowering the tax bite if you wish but please recommend that your clients protect their family assets by staying within the law (your contractual obligations). When the client eventually realizes that there is no way to safely reside within the tax system, they may want to get out of it completely with a Corporation Sole.
The religious society's property that is in the custody of the Overseer cannot be taken by a court for satisfaction of personal claims against the Overseer, because the property is held ONLY in the Overseer's fiduciary capacity. At one point in American History, the Patriarch of every household was legally considered as being the Overseer of a common-law Corporation Sole. In looking at this pattern, it appears that the U.S. Constitution's prohibition against "corruption of blood" is one of the legal foundations and supports for this concept. When no law can restrict the right, by blood relationship, for your children to inherit the fruits of the parent's labor, this is identical in precept to no law being able to take away the right of future members of your congregation or religious order [family religious unit] to use and enjoy the property of previous generations. Quite obviously, the founding fathers of America thought of the family as the basic religious unit of society. We are therefore acting as a fiduciary for our grandchildren and the family property is not ours alone but belongs to the family. Taxation is the only means for governments to work "corruption of blood". Because no law may impair obligation of contracts and when one places their family?s property under contract (mortgage or otherwise), that property is no longer protected by the "corruption of blood" provisions. The primary contract that compromises our right of owning property is the Social Security Number.
One of the most difficult contracts that one must deal with is the UCC's "holder in due course" issue regarding the Federal Reserve Notes (FRNs). The Corporation Sole Vow of Poverty (? These are two separate options: MM) deals with this issue better than any other method that I have seen. By not owning anything, we can be carrying pockets full of FRNs, be in charge of massive investment accounts, and still have no personal liability for the bankruptcy nature of the Federal Reserve Notes [United States Bankruptcy debt instruments].
During the "transition phase" out of a life that is completely under government regulation and control and into a life of liberty and privacy, it would appear that the Corporation Sole could be a valid and valuable tool for many traditional family units, both as a limit on liability and for protection of family assets.
What is a Church?
IRS Publication 557, Tax-Exempt Status for Your Organization, states: "Because beliefs and practices vary so widely, there is no single definition of the word "church" for tax purposes." The inability of the IRS to define the word church has a large part to do with the First Amendment to the Constitution of the United States of America. Black's Law Dictionary, fourth edition, defines the word "church" as the following: "In its most general sense, the religious society founded and established by Jesus Christ, to receive, preserve, and propagate his doctrines and ordinances." Black's 7th edition does not define the word "church", this is interesting because this edition is the current dictionary used by Lawyers and Judges at the time of this writing.
IRS REGULATIONS REGARDING THE PRESIDING OFFICER
Section 6033 (a): This section exempts religious organizations from the need for filing returns of any kind. 6033 (a)(2)(I) provides for mandatory exceptions to filing requirements for religious organizations and states that filing requirements shall not apply to "churches, their related auxiliaries, and conventions or associations of churches"; 6033 (a)(2)(A)(iii) exempts as well "the exclusively religious activities of any religious order".
Explanation: Under 6033, your church or religious order has complete immunity to disclosure. It is not necessary for you to maintain records of any kind except for your own purposes and reasons.
Section 107: In case of a minister of the gospel, gross income does not include: (1) the rental value of a home furnished to him as part of his compensation; or (2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home.
Explanation: In order to qualify for the exclusion, the home or rental allowance is remuneration for services, which are ordinarily the duties of a minister of the gospel. The rental allowance is for, the rent of a home, the purchase of a home, or expenses directly related to providing a home.
Section 3401 (A) (9): provides that the definition of the term "wages" for tax withholding purposes does not include remuneration paid "for services performed by a duly ordained, commissioned or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order; etc."
Explanation: IRS regulations provide guidelines for IRS employees to help them understand the IRC. IRS Regulation 31.3401 (a) (9) (d) states: "Services performed by a member of a religious order in the exercise of duties required by such order includes all duties required of the member by the order. The nature or extent of such services is IMMATERIAL so long as it is a service that the minister is directed or required to perform by ecclesiastical superiors."
For Example: If Father McLaughlin is directed by his order to work for the Federal Government in the Office of the President, then his employer (in this case, the Federal Government) is not under any compulsion whatsoever to withhold either federal income taxes or social security taxes. A religious order may require a member be an Advisor to the President, a pilot, or a bank loan officer. The regulation states that the nature or extent of such service is IMMATERIAL.
Publication 526: states that up to 50% of an individual's adjusted gross income are deductible for contributions to "qualified organizations". Corporation Sole, as a church is a "qualified organization".
Explanation: A person with W-2 earnings with an adjusted gross income of $30,000 may generally contribute up to $15,000 and claim such a deduction.
Section 1402 (c) (4): provides that "the performance of service by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order", is not considered a "trade or business" when used with reference to self-employment or net earnings from self-employment.
Explanation: An auto mechanic, gardener, or medical doctor may be self-employed. If the religious order of which one is a member directs one to undertake duties in one's field of training or experience, as a self-employed person, then any income received is not taxable as income from a "trade or business".
Publication 15, 1978 Circular E: Employer's Tax Guide is distributed free of charge by the IRS. Page 11, states "Members of religious orders who have taken a vow of poverty performing duties required by the order are exempt from income tax withholding and from social security.
Explanation: Publication 517, p. 2 and 5. When one is under a vow of poverty, the physical objects in their possession are not their own, although it may be their job to look after and use those objects. Taking a Vow of Poverty to the Corporation Sole (or Religious Order, more likely - MM) means owning nothing, but controlling all, as a steward of God's property.
Section 1402 (e): exempts "a member of a religious order who has taken a vow of poverty as a member of such order" from taxes under the Federal Insurance Contributions Act, FICA or social security. There is no requirement that you file for this exemption from social security tax. The exemption is automatic when you are a member of a religious order and have taken a vow of poverty as a member of your order.
Under fundamental law, rights and privileges granted any church or religious order must grant all - everyone - the same rights and privileges. You have cause for prosecution under the U.S. Constitution if discrimination of or denial of rights has occurred to members of your church or religious order. Any person, including any government official, within the jurisdiction of the U.S. Constitution, who acts to prefer one religion to any other in an official capacity, is acting in violation of the Constitution. At the very least, a government employee may be dismissed for violating his oath of office to uphold the Constitution and he or she may be subject to civil and criminal penalties, with fines up to $10,000 or imprisonment up to five years, or both.
FAQ ( - USA)
Q. What NAME do I use?
A. The name that you use is important, it will describe the organization and the vision that you have for your Corporation Sole. A name should reflect an image of your intent with the use of Fellowship, Brotherhood, Services, Alliance, Ministries, Center, Awareness, Health and/or a name that would be used to describe the following titles; Church, Synagogue, Mosque or a name related to the religion practiced in them. NOTE: Do not use your personal name.
Q. Will I need my Social Security number for the Corporation Sole?
A. You will be provided with a 9 digit Federal Identification Number to open a checking account for the Corporation Sole. However, because you will be the signatory for the Corporation, some banks require your personal Social Security number to verify with the Banking Commissioners office to assure them that you personally have not had any banking fraud or checking fraud within your state throughout the past. You will find that not all banks require your SSN#. You may give it to them or refuse and go to another bank if you wish. It is not mandatory by law for them to require this; it is a policy of the bank that you choose.
Q. How can I be a church?
A. It may take some time to get used to the idea that you, personally, are the embodiment of a church. A church is not bricks and mortar, a church is a specific place to worship. Wherever you are is an appropriate place to worship. I recently saw a book titled, "My Monastery is my Minivan". Your body is your temple and you carry your beliefs and values with you wherever you go. In Black's Law Dictionary, one of the definitions for a church is: the clergy or officialdom of a religious body. Webster's Dictionary states that a religion is: a personal set of beliefs and practices held to with faith and ardor.
Q. What is a simple definition?
A. It is an unusual type of corporation consisting of only one person whose successor becomes the corporation on his death or resignation and therefore, lives on in perpetuity.
Q. What powers does a Corporation Sole have?
Contract in the same manner as a natural person.
Sue and be sued.
Defend and be defended in all courts.
Borrow money and give promissory notes.
Buy, sell, lease, mortgage and in every way deal in real & personal property.
Receive bequests and income for its own use.
Appoint attorneys in fact.
Q. What are modern uses for a Corporation Sole?
A. The Catholic Church, the Mormon Church, the Queen of England, the Governor of Tennessee and YOU. The structure of the Corporation Sole is so flexible it can run a very large or a very small organization. It can run any business that in some way serves God, humans, animals, or the Earth. Even if you have an employer, the Corporation Sole serves you and your family/friends as you determine, maybe as a means of providing charitable endeavors, education for a child, estate planning, protection and privacy.
Q. How is it legal?
A. It is legal by its creation in common law internationally. Our right to religious freedom is protected by the Constitution of the United States of America in the First Amendment: "Congress shall make no law respecting the establishment of religion, or prohibiting the free exercise thereof?"
Corporation Sole is looked upon by the IRS as a "qualified organization". IRC §508(c)(1)(A), a church, among other specific types of "organizations", is not required to file Form 1023 and obtain a 501(c)(3) designation to be tax exempt. (It is listed as a Mandatory Exception to taxation.) IRC Section 6033 is illustrative of the separation of church and state by pointing out that religious organizations are exempt from filing returns of any kind and there are no record keeping requirements. (In fact, it is a Mandatory Exception to the rule for filing returns.)
Exception means "there is no law". IRC § 6043 states that if an office holder in the Corporation Sole finds themselves emotionally, spiritually, financially or personally unable to keep their commitment to the mission and they do not wish to name a successor, they may terminate it without filing a return regarding liquidation, etc. The Corporation Sole does not report to the IRS, it reports to the Creator!
Q. Is there a difference between legal and lawful?
A. Yes. In the simplest of terms: To say of an act this is "lawful" implies that is authorized, sanctioned, or at any rate not forbidden by law. To say that is it "legal" implies that it is done or performed in accordance with the forms and usages of law, or in a technical manner. Lawful more clearly implies an ethical content than does legal. The word legal is used as a synonym of constructive, which lawful is not. Laws are made in the democracy, so legal is the rules the federal government places on its citizens.
Q. How long does it take to create a Corporation Sole? (This is OUR version of the response - MM)
A. Within two business days of receipt of the application and payment, and subject to the information provided not leading to further queries, you will be sent the Corporation Sole Charter by Express Post (3 business days within the USA). It requires the signatures of the Overseer, Secretary and two witnesses. You will also receive brief Guidelines (the information on the website will continue to be updated and represent your main information base). The longest wait will be in your applying for and getting the EIN from the IRS.
Q. Why doesn't everyone use a corporation sole - if it is as good as you say?
A. Corporation Sole has been around since the year 1215. It is not a "new kid on the block" for asset protection. The reason why it is not widely known about or used is that its use eliminates the need for attorneys, CPAs and other professionals usually associated with more traditional types of legal entities.
Q. Does every state recognize the Corporation Sole from another state?
A. Yes, even in states that have no statutes concerning the CS, they recognize the legal existence of the Corporation Sole from another state on account of the Law of Comity - which says that there is common agreement among all the 50 states to honor and recognize the legal status of each state's documents [i.e.; corporations, marriage licenses, driver licenses].
Q. All of this sounds too good to be true--how come my attorney and my CPA have never even heard of the corporation sole?
A. Most accountants and lawyers will confuse Corporation Sole with a "non-profit" or "not-for-profit" organization formed under IRS 26 U.S.C.S. 501 (c)(3) and fight with or re-characterize your objectives. It must be emphasized that the Corporation Sole is different from a "non-profit" or "not-for-profit" organization in almost every conceivable way. Asking a lawyer or accountant to educate him/herself can become extremely costly, nevertheless, please seek a competent advisor. Professionals in the field of taxation, accounting and asset protection sometimes have a tendency to stick with the familiar, the known, the most lucrative choices - when it comes to what they offer to you, the consumer. However, the consumer is always cautioned to "BE AWARE!" So, our advice to you is: Do your "Due Diligence" - check everything out, get all of your questions answered to your satisfaction - you have a right to know ALL the facts prior to moving on any decision concerning your financial and spiritual decisions.
Q. What should I tell my CPA or attorney?
A. For the most part, these professionals will not understand the Corporation Sole. It is not taught in traditional schools that teach statutory law. Your CPA can simply continue to keep the books for you, if you choose to keep books for your knowledge. They can even prepare year-end statements for you. The statements go only to you. You can take the time to educate your attorney about the Corporation Sole, if you wish.
Q. If I check with the IRS, what will they tell me about corporation sole?
A. Most lower level IRS employees do not know about the Corporation Sole. However, the Internal Revenue Code does address the corporation sole directly in §508 and §6033. Those sections state that churches and their integrated auxiliaries are MANDATORILY EXCEPTED FROM FILING. Further, the Constitution First Amendment says that Congress shall make NO LAW concerning the establishment of religion nor the free exercise thereof. So neither Congress nor the IRS has the power to regulate or control a corporation sole. When the IRS Form SS4 is completed to obtain the EIN for the CS, it is made clear that the Corporation Sole is: a) mandatorily excepted from filing; b) it is applying for an EIN for banking purposes only; and c) application is being made for a NONREPORTING EIN.
Q. How does a Corporation Sole compare with a 501(C)(3)?
A. The IRS grants a tax-exempt status to certain organizations that perform nonprofit functions that support governmental PUBLIC POLICY. Churches, which by definition are IMMUNE from taxation, voluntarily apply for tax exempt status under the Internal Revenue Code, become incorporated under the state where it resides, waives all of its constitutional protections, and becomes a ward of the state by becoming a "religious organization" under Internal Revenue Code §501(c)3. The other option, open to the church is to form a corporation sole, which by definition, is an unincorporated association, given legal status and existence by the state, created by God Himself, subject only to Him, is tax immune, and does not answer to the state since it is not created by the state - in contrast to the 501(c)3 which has voluntarily subjected itself to the godless state and godless IRS. The Corporation Sole still has all the constitutional protections provided by the Constitution. The 501(c)3 is forever dependent upon the good graces of the government for its continued existence as long as it operates within PUBLIC POLICY as defined by the government. The Corporation Sole is never subject to the government for its existence and answers to its Creator for its actions.
Q. What if I already have a 501(c)(3) organization?
A. There are procedures in the regulations of non-profit organizations that you can follow to terminate this designation. At the same time you can change the name slightly and continue your mission as a Corporation Sole. The relief from the reports and scrutiny are worth it. Is your covenant with God or the government? Which will be the most beneficial to the mission?
Q. Can a 501(c)(3) become a Corporation Sole?
A. Yes, but not in those terms. A presently organized 501 non-profit tax-exempt corporation can be closed or phased out once your Corporation Sole is established. You simply begin to operate under your Corporation Sole and begin to factor out the 501. You may need to speak to the attorney who maintains the corporate books and seal to explain this action and direct him to eliminate your accountant, but, it will be necessary for you to maintain the records of the Corporation Sole should you ever be challenged in court. Although, you do not have to show records of the CS, it is important that you can answer the court under oath that you have maintained records for the Sole.
Q. Can a Corporation Sole accept charitable donations?
A. Yes. IRS Publication 526 indicates that "qualified organizations" can accept charitable donations simply by virtue of being a church. Churches do not need to apply to be a "qualified organization." The Corporation Sole can take tax-deductible donations for its mission. It qualifies as a 50% organization, meaning that the deduction for a taxable person's charitable contributions can be 50% of their adjusted gross income for the year. If you work for W-2 wages and are the office holder in a CS, you could donate 50% of your adjusted gross income to the Corporation Sole for its mission. If you work for 1099 wages, the 1099 can be made out to the Corporation Sole and will be tax-free.
The Corporation Sole can make charitable donations to other organizations, too, with NO reporting requirement. When accepting a tax-deductible donation for the CS, it is important to write a formal letter of acceptance to the contributor. It must have the name of the CS, the business address of the CS, the amount of the donation and a general statement accepting the donation of goods or monies on behalf of the Corporation Sole to be used to further the mission.
Q. Can the Corporation Sole run a business?
A. Yes, a corporation sole can do everything a flesh and blood person can do except give blood! However, when a Corporation Sole owns and runs a business, it must do so through an EIN issued by the IRS and must not have employees. At least two options are open to the Corporation Sole to avoid employer-employee relationship: a) have everyone do business with the Corporation Sole via a private contract; or b) have a third party leasing company provide employees leased to the CS.
Option 1: The Corporation Sole can enter into a contract with an existing business to be the fiduciary or administrative/managerial head of the business so all profits go to the Corporation Sole tax-free. If the business is set up as an LLC, S or C Corp. (we would recommend a Nevada Corporation, there are reporting requirements for those entities even though there is no tax liability. You would be exposing the Corporation Sole as the head of the business. Not a problem, but you give away some privacy. The Corporation Sole could "buy" the existing business, the former business would close on paper, following the IRS guidelines for closing or ending this entity. There are many strategies to accomplish the goal in privacy.
The Corporation Sole owned business could continue with a slightly different name. Example: Holistic Care Center, LLC is sold to Holistic Care Ministry/Mission/Foundation/Affiliation/Group/Assembly/Community Center or HC Group, etc. The Holistic Care Center, LLC is closed according to the guidelines for your state. Avoid standard commerce terms for the Corporation Sole such as services, company, corporation, etc. Think of the Apostle Paul who was a tent-maker. The Corporation Sole can run a business to provide a means to follow its mission. It can be a grocery, contractor, carpenter, department store, school, medical office - just about anything you can think of that is legal and lawful.
Option 2: It is better to have independent contractors working for the Corporation Sole and give 1099s if the person wants one. The Corporation Sole is not obligated to give 1099s. It is better not to have the type of employees that require/desire withholding of taxes, etc., so that you cut down on paperwork and eliminate reporting exposure.
Q. Can a Corporation Sole get a business licence, or should it?
A. If the license is for a business which must have a license in order to do business, it would be appropriate. Examples would be contractors and medical offices. If you are speaking of a broker's license, the Corporation Sole cannot, because those are issued to individuals and not businesses. Local laws will establish if a Church HAS to get a license. Check with your city or county laws in the area in which you live/operate.
Q. Can a W-2 employee utilize a CS?
A. Yes, a W-2 employee can contribute up to 50% of his/her income to the Corporation Sole - and claim that 50% as a tax deduction pursuant to 26 USC, § 170. Further, that W-2 employee can choose to take a Vow of Poverty, and thereby stop all social security and Medicare deductions.
Q. What about my retirement accounts?
A. In some instances, retirement accounts can be transferred or assigned to the Corporation Sole. You will have to check with your IRA trustee. Some will allow a trustee-to-trustee transfer. Some IRAs will only allow the beneficiary to be the CS, but not the change of the account holder. That would mean that if you are not "untaxed", you would be responsible for the tax on the 50% that could not be donated to the Corporation Sole. You could withdraw the entire amount now, pay the early withdrawal penalty, and put the money in the Corporation Sole. You would only be able to claim a 50% charitable donation on your taxes. Take your time and look at the pros and cons of this financially.
Q. Can I put all of my assets into the Corporation Sole?
A. Anything that you own - money, real estate, personal property - can be donated to the Corporation Sole. If there is one or more particular items that would create liability exposure for the Corporation Sole, it would be better to put that/those items into a separate Corporation Sole.
Example: The Eye Center has a van that picks up patients from their home and transports them to the Center for surgery. After surgery, the van again transports them home. This van would need to be a Corporation Sole of its own, because it presents a significant risk, it is a high liability item. By isolating it in its own CS, should there ever be an accident and litigation, none of the other assets of the umbrella Corporation Sole could be discovered or touched. For that very same reason, large estates or businesses should consider more than one Corporation Sole and divide assets into them appropriately. Example: A large physician group would have one umbrella Corporation Sole for the practice and each individual physician would have one or more of his own Corporation Soles. [did you know that each commercial airliner is a corporation, therefore if the plane crashes, all the assets are gone, and nothing will be paid out in liability as there is no asset to liquidate! The airline itself is not liable - sounds similar: MM]
Q. Can the corporation sole be an effective means to provide asset protection?
A. Yes, once both real and personal property is placed in the Corporation Sole: a) it is not subject to lien or levy; b) is not subject to inheritance tax or gift taxes; c) is not subject to probate; d) is not subject to estate taxes.
Q. How are assets transferred into the Corporation Sole?
A. Cars, boats, trailers, campers, etc., are transferred in by title. This can be done with a simple "bill of sale" or "sale of motor vehicle" document that can be purchased from an office supply store. The cost is listed as "gift", no money exchanged. You can also use the forms offered at this site. These forms can be modified to meet your needs and can be typed up on your own computer. Always follow the requirements of your local city, county and state; sometimes they require you to use their forms. Most title companies will accept any document agreed to by both parties. Since both parties are you, the individual and you, the office holder, agreement should be easy to reach! Real estate is transferred by deed. If there is a pre-existing mortgage, you will want to transfer the "equity interest" into the Corporation Sole using a standard Quitclaim Deed which can be purchased at an office supply store.
Q. How do I transfer personal property into the Corporation Sole?
A. Personal property, without encumbrances, can be transferred into the Corporation Sole with a letter stating that all personal property, household goods, furnishings, etc., previously owned by Mary Jones and located at (add physical address of property) is tithed to the Corporation Sole as a gift of love and appreciation. You may want to itemize very valuable items such as coin collections, art, jewelry, etc. This letter can be notarized or witnessed by two people who have no interest in the property. The letter is then kept with the Corporation Sole Charter. It is not necessary to list everything as long as it is clear what is YOUR personal property. If you are married or living with someone, the lines may not be clear as to who owns what as personal property. Under these circumstances, a list would be prudent.
Q. Once I put something in the CS, can I get it out?
A. Yes. As the Overseer of the CS, you can buy, sell, trade or donate any property, real or personal. Transferring property out of the Corporation Sole may create a tax liability for the person or entity receiving it.
Q. How can a Corporation Sole establish credit to buy a house or car?
A. One way to do it is to pay mortgage and car payments from the Corporation Sole bank account. The creditor doesn't care who makes the payments as long as they get paid. After 6-9 months of making payments from the Corporation Sole account, you can approach a creditor with the payment history. Often you can get a low-limit or secured credit card in the name of the Corporation Sole very soon after establishing a checking account with a bank.
Q. Can creditors attach my assets for the Corporation Sole and vice versa?
A. When you form a CS, you must picture yourself as two distinct people and so must your creditors. The assets in the Corporation Sole belong to the church and you are the caretaker of these assets, not the owner. The Corporation Sole assets are not attachable for anything you do as an individual. You, as an individual, are not attachable for anything that is in the Corporation Sole. What belongs to one does not belong to the other. They are separate and distinct. The Corporation Sole can pay your personal debts, if you, the office holder, deem it appropriate to do so. Is it in the best interest of the Corporation Sole for it to pay the mortgage on your home and the loan on your car and provide you with necessities and even luxuries of life? The Creator God wants you to be prosperous and joyous that you may add light to the world. Your personal assets donated to the Corporation Sole are sacred and cannot be touched by anyone other than you.
Q. Does the property owned by the corporation sole pay property and sales taxes?
A. Property owned by the Corporation Sole is not subject to property taxes. However, one must go through the proper channels to make application to the county taxing authorities to exempt the property from taxation. Depending on your zoning ordinances and county assessor, the property can be rezoned or taken off the tax roles (can you have a commercial property in your residential area?). Consider whether the amount of the property tax is great enough for you to want to petition for exemption. Sales tax is much the same and can depend on city, county and state ordinances.
Q. If the Corporation Sole owns real estate property and sells that property, does it owe capital gains taxes?
A. No, it does not since it is not subject to taxation by the government.
Q. Can the Corporation Sole sue and be sued?
A. Yes, just as a natural person, a corporation sole can sue or be sued. However, in most cases, because the Corporation Sole is not directly involved in commerce, it is much less likely to be sued unless property owned by the Corporation Sole damages a person or that person's property. In that case, the Corporation Sole has a legal and moral obligation to restore that person and his/her property to wholeness whenever and wherever possible.
Q. Can I still get insurance on things in the CS?
A. Yes. The Corporation Sole in the banking world is considered a business entity and so all insurance of items qualifies as being owned by the business and standard insurance is available as such. Some State Farm Bureau Insurance agencies have been helpful, but I would check with your own insurance company first.
Q. What other kinds of things can go into the CS?
A. You will want to change the beneficiaries on insurance and accident policies to the Corporation Sole. Also you will want to change ownership of stocks, bonds and all types of investments.
Q. Can more than one person be the Overseer and/or have access to the Corporation Sole bank account?
A. No, by definition, a Corporation Sole is a ONE man corporation and only ONE person [male or female] can be the Overseer at one time. Usually, if the husband is the Overseer, it is recommended that the wife be the Secretary; if the wife is the Overseer, then the husband would be the Secretary.
Q. What if I am married? Can we do the Corporation Sole together?
A. No. The Corporation Sole is a one-person organization and only one person has control of what is in the Corporation Sole. One spouse could have a Corporation Sole that runs his or her personal business and owns their personal property. Property now held in both names cannot be put into the Corporation Sole unless both agree and it would then be under the control of the officer of the CS, one person. When a spouse does not want to form a CS, the house could remain in both names and a Quitclaim Deed transferring 50% of the equity interest to the Corporation Sole could be done. Each individual may also form their own Corporation Sole and a division of assets could be determined for the purpose of transferring titles or deeds.
Q. What happens if the Overseer dies unexpectedly - who is the Overseer then? (Amended - MM)
A. In consultation and prayer, the Secretary (or Registered Agent in some States) and close associates of the religious organisation where he holds office (perhaps relatives and friends of the deceased Overseer) will appoint a new Overseer according to the terms of the Charter.
Q. What happens if I have 4 children - how do I as Overseer, pass on to my children any inheritance?
A. Legally, any assets placed in the corporation sole no longer belong to the donor. However, these same assets are available for the use of anyone the Overseer sees fit to bless. At least two options are open to bless the 4 children: a) establish 4 corporations sole - one for each of your children, and transfer any assets from one Corporation Sole to another; or b) one of your children would be appointed Overseer and, by contract with the other three, would provide for their access to use the assets held by the corporation sole.
Q. I looked on the internet and some sites call the corporation sole a scam and "tax protestor" tax avoidance scheme - and that the IRS is shutting them down and putting people in jail. Is this true?
A. For some strange reason, people tend to think that if something is on the Internet, it must be true. Nothing could be further from the truth! On the Internet, as well as every other marketplace, it is "Buyer Beware!" - which simply means check things out, take your time to get all your questions answered to your satisfaction, get all sides of the issue exposed to the daylight. If one does that, where the Corporation Sole is legally and morally presented in the context of its true nature as the church, it will emerge as the "Best of the Best" for asset protection.
What I would do is to first of all make copies of all of the correspondence that you have received including the envelope. Then do a google search (do not try to get this from irs.gov) for Form 4490 Proof of Claim 5 page Form and copy it down, but do not fill it in. Then I would send certified mail this form with a cover letter that tells them to fill out the form and get it back to you in 15 days sent to the last place that sent you a letter. Be sure to include your name and address and SSN on the cover letter and keep a copy of it and the Form 4490. After they do not respond (have not had one responded to yet) send a registered mail complaint to the universal postal union in Bern Switzerland stating that this agency is attempting to collect on a debt that they have refused to verify (cost about $25.) and are using the United States Mail to do it--mail fraud. You will need the correspondence from them including the envelope and use the copy of what you sent to the irs as an exhibit of what you sent to the irs.
(this is not legal or tax advice bla bla bla)