by: Peter Kershaw, © 2004, All Rights Reserved
In the past several years I've been asked by an ever-increasing number of pastors and ministers for my legal opinion of the "corporation sole" (sometimes also known as the "corporate sole").
The reason I'm so-often asked about the corporation sole is because corporate sole promoters have misled pastors and ministers into believing that what they're promoting is equivalent to what my ministry is doing. However, as you will soon discover, there's nothing in common between a corporation sole and a free-church. In other words the term "corporation sole free-church" is an oxymoron.
I wish there had been an accurate and credible web site, or a book, or some other resource I could have directed pastors and ministers to so they could get their corporation sole questions answered. Unfortunately, there hasn't been such an information resource; so by default the task seemed to fall to me.
I've only been able to identify one other internet site that has challenged the legal theories being promulgated by corporation sole promoters. In my estimation, that site does little more than take a rather dismissive tone, while doing nothing to educate. Shedding light on the corporation sole issue necessitates not only challenging myths and urban legends, but also credibly articulating the legal attributes of the corporate sole, as well as defining who can legally use one, and for what legal purposes. All of this must be accomplished in the context of present-day American jurisprudence.
This page, and the several pages which follow, are offered here in an effort to help you sort fact from fiction, and provide some balance to the disingenuous promotion taking place over the corporation sole.
Sorting Fact from Urban Legend
There are dozens of internet sites promoting the corporation sole, and those sites invariably make significant, if not incredible, claims about the legal attributes of the corporate sole, such as tax immunity and asset protection. But is it all true? Few people possess the legal acumen to be able to determine for themselves which claims are valid, and which are myths and urban legends. However, even if you don't possess any legal acumen, there is much to be said for just relying on good old common sense.
It's not just pastors and ministers who have asked me to help them distinguish corporation sole fact from fiction. Many other folks have asked me, as well. It's apparent that Christians are often the target of corporation sole marketing, as evidenced by the fact that many Christian newspapers and periodicals are being paid to run ads for corporate sole sales companies.
For example, a Christian newspaper included in its April 2004 edition my article, 501c3 Religion: Reemergence Of the Divine Right Of Kings. The paper had sought and obtained my permission to do so, and I'm grateful to them for running my article. In that article I point out the legal and theological problems with organizing a church as an incorporated 501c3, including the fact that any such church makes itself subordinate and subservient to the civil government.
Aside from the serious legal ramifications, there are immense theological ones, as well. A corporation is "a creature of the State." Moreover, "the State is sovereign over the corporation."
While at one time the public policy decreed that America is a Christian nation governed by Christian principles, we must now take cognizance of the fact that America is a post-Christian nation. The State no longer acknowledges the authority of the Lord Jesus Christ and, in point of fact, is hostile to it. Since "the State is sovereign over the corporation," we should carefully ponder who is really sovereign over the incorporated church.
Ironically, immediately adjacent to the close of my article, there appeared an advertisement by a corporation sole sales company which, in part, read:
My article was critical of the notion that churches would voluntarily, and unnecessarily, subordinate themselves to civil government jurisdiction by incorporation. But then the reader finds himself confronted with an advertisement promising that, by only purchasing a corporation sole, he can "Operate under God's laws and not man's laws," and that the corporation sole allegedly "operates outside the jurisdiction of government."
To have such an ad placed immediately adjacent to my article is an unfortunate irony, and giving the paper's editor the benefit of the doubt, I also trust that the ad's placement was just a coincidence. It would be unfortunate if anyone were to actually patronize that corporation sole salesman, based merely upon his unsubstantiated, illogical and (as you soon will see) bogus claims.
Corporation sole promoters have often taken advantage of me through what they perceive to be a free publicity ride. They take advantage of the fact that I have numerous books in circulation, that I regularly do radio interviews (and an occasional television interview), that I write articles for various periodicals, that I speak at conferences, in all of which I have consistently knocked the incorporated 501c3 status of the church.
Corporation sole promoters love me for knocking the 501c3, because they knock the 501c3, as well. However, as you will soon see, their motives for doing so are entirely different from my own. Some corporation sole promoters love what I write so much that they even sell my books and videos (but more often than not they just plagiarize my books and pirate my videos).
Legal Purpose of the Corporation Sole
The first question I am usually asked is, "Is the corporation sole legal?" Yes, the corporation sole is a valid, legally-recognized corporate entity. The corporation sole is "legal," as long as it is used "legally." That is, provided that it's used in accordance with its intended purpose, and those statutes which govern it, the corporation sole is legal.
Herein lies the crux of the problem -- no promoter advertises the corporation sole according to the legal attributes that are in any way consistent with its intended purpose. Rather than interpreting the legal attributes and intended purpose of the corporation sole consistent with state statutes, case law, and the Internal Revenue Code, they have fabricated their own fanciful legal theories, based upon nothing more than their own wishful thinking. As a direct result, corporation sole promoters are routinely violating a multitude of laws, encouraging their clients to do the same and, as a direct result, getting their clients into serious legal trouble.
The intended legal purpose of the corporation sole, according to the state statutes of those few states which still permit its formation, is to provide a legally-recognized mechanism for organizing a church or religious organization, or for organizing a "religious office" or "ecclesiastical office," that may hold title to real property that is used in perpetuity for exclusively religious purposes.
Why is the corporate sole sometimes deemed expedient for certain types religious organizations, and why couldn't they just use a regular non-profit corporation? Standard non-profit religious corporations are governed by a board of directors (which is why they are referred to as a "corporation aggregate"), and they may not adequately address the special needs of certain religious organizations, particularly in areas of governance (church polity).
For example, the standard non-profit religious corporation is not particularly compatible with the hierarchical polity of the Roman Catholic Church. The Catholic Church is divided regionally into "dioceses" which are governed by a single Bishop, not a board of directors. As such, the corporation sole is usually compatible, and well-suited to the polity of the Roman Catholic Church. The corporation sole, however, is probably not at all compatible with the typical Protestant Church, since it's the opposite of a hierarchy, and typically governed by a body (or a board) of elected elders and/or deacons.
Corporation Sole Sales Sites: Are They Credible?
Dozens of sites on the internet are promoting the corporation sole. With few exceptions, all of the corporation sole web sites have been placed there by the same people who are trying to sell it.
Common sense dictates that we question the objectivity of the corporation sole sales materials, just as we would question the objectivity of any sales organization, and the claims they would make of any other product. This isn't to infer that all salesmen are liars, but merely to point out the obvious -- many salesmen have a propensity for not telling their customers the whole story.
It's usually not very inexpensive to buy a corporation sole, either. If the corporation sole actually accomplished everything the salesmen claim (tax immunity, asset protection, etc.), then it would be a bargain at almost any price. If the corporation sole actually accomplished everything the salesmen claim, and if people weren't getting into serious trouble for using it, and if it could be used without bringing ill-repute on the church of Jesus Christ, then I'd be the first one to go out and get one for myself. But these are big ifs.
Just like so many other salesmen, corporation sole salesmen are only giving a one-sided story; but as the old adage goes, "There's two sides to every story, and the wise man always gets boths sides of the story." None of the corporation sole sales sites, in my estimation, are at all credible or in the least objective. Most all of them are making incredible claims that aren't backed up with anything, other than their own wishful thinking. What little case law, and the few statutes they cite, are misrepresented and taken completely out of context.
In an effort to debunk some of the shoddy legal research commonly evidenced among corporate sole promoters, I prepared and released a legal review in 2000 of Jeffrey Thayer's treatise, The Corporation Sole, Its History, Significance and Creation. Geoffrey Thayer (aka "Geoffrey Craig benRichard barAbba" and "Sir Geoffrey Craig") is a former (disbarred) attorney. Jeffrey Thayer is a graduate of an ABA-accredited law school. Since he had a formal legal education, one would suppose that he would be capable of researching law and competently interpreting it.
However, after reading my legal review you should be able to readily determine for yourself if Jeffrey Thayer possesses a competent legal mind. One thing everyone seems to agree upon is that Jeffrey Thayer possesses a knack for self-promotion, and he profited immensely from peddling the corporation sole. Jeffrey Thayer held numerous corporation sole seminars and trained many others to go out and make a bundle peddling the corporate sole for themselves. Jeffrey Thayer liked to impress people with titles like "J.D." and "Esq." but he never once mentioned that he'd been disbarred.
Jeffrey Thayer was never able to overcome my legal challenges to his specious corporation sole legal theories, and his credibility was greatly undermined thereby. My legal review received wide circulation, including within Thayer's own ranks. Jeffrey Thayer's lack of response made it self-evident that his corporation sole theories were indefensible and bogus, and that he was little more than a peddler of sham entities. Having thus lost all credibility as the legal guru he had pawned himself off as, Jeffrey Thayer appears to have moved on to other dubious pursuits.
Unfortunately, many other corporation sole promoters have since risen up to take Jeffrey Thayer's place, and their legal training and acumen is even far more lacking than was Thayer's. Needless to say, with an upsurge in the number of corporate sole peddlers (among whom none appear to possess much in the way of legal acumen) the hype over the corporation sole has only increased, while the legal claims become evermore incredible.
If the corporate sole salesmen were honest, they'd give both sides of the story, such as the fact that numerous people are having huge legal problems as a direct result of their use of the corporation sole (specifics provided later). However, any demands I might make that they provide full disclosure would be an unrealistic expectation, since to make such disclosures would cost the corporate sole salesmen millions of dollars in lost sales (it's a lucrative racket, indeed, and has quickly taken many of them from rags to riches).
My experience has been that if you want objective information about a product or service, you shouldn't expect to get it from the very salesmen who stand to profit by selling it to you. Of even greater concern to me is the fact that the ranks of corporation sole salesmen are inundated with scalawags and swindlers (evidence provided hereafter).
This isn't to allege that all corporation sole salesmen are con artists. It could very well be that there are at least a handful who have the best of intentions. However, it would be irresponsible of me to not point out that the corporation sole racket has attracted many men and women with a penchant for the criminal enterprise (e.g. convicted felons), as well as those of the most sordid of character. Be particularly wary of those who wrap themselves in the flag and quote Scripture, while they're attempting to vacuum out your wallet. Charlatans are keenly aware that religion and patriotism are two of the most effective means of tugging at the naive victim's heartstrings.
Corporate sole salesmen are recommending the corporate sole be used not only for real churches and religious ministries, they're also recommending them for individual families, businesses and just about everything imaginable.
Corporate sole salesmen allege that since the corporation sole is generally used for "religious" and "ecclesiastical" purposes, anyone can form one, become the "head Bishop," and claim they don't have to pay personal income taxes because they're the corporate sole head of a church.
Names can sometimes be indicative of the activity something engages in, and the name of a corporation sole is often no different. Some of the corporation soles we see registered are probably real churches and religious ministries. However, the names of many other corporation soles tend to make them highly suspect, since they appear to be commercial businesses and investment ventures.
Corporate sole salemen claim that just about anything can be construed as a "church," including an individual family, and the home the family lives and practices its "religion" in (thereby making the family dwelling a "church" building). Supposedly, any family can define "religion" any way they want to, such that even the family's business can be part of their "church" and supposedly not be liable for taxes. Any profits from investments made by the "church" are allegedly tax exempt. 1
Allegedly, all the family income can be donated to their "church" (often under a so-called "oath of poverty"), thereby avoiding all personal income tax liability. Anything given back to the family by their "church" supposedly isn't income, but a "charitable donation."
Since the government can't define religion, the corporate sole salesmen's claim is that they get to define a "church" any way they arbitrarily please. Such an alleged "church" is tax-exempt, even if that corporation sole "church" never obtains 501c3 status. In point of fact, the corporate sole salesmen specifically tell their clients not to apply for 501c3 status. Instead, they claim that they're "automatically exempt" as a "mandatory exception" under Internal Revenue Code Section 508c1A. 2
According to many corporate sole web sites, the corporation sole is such a big "secret" that the IRS doesn't even know about it. In addition to all these spectacular claims, we are also told that there is nothing the IRS can do to stop the corporation sole (even if they knew about it).
Call me cynical, but if it sounds too good to be true. . .
For specifics on the corporation sole, including its historic origins and development, its legal attributes, and how the U.S. government, and particularly the IRS, is targeting corporate sole promoters and their clients (yes, the IRS is very familiar with it), click the "NEXT" button, below.
1. In the case of Jan Marcusse of "Discovery Church" (also "Sanctuary Ministries"), I heard her tell one audience, "With a little creativity, you can turn just about any taxable business into a nontaxable 508 church. You'll never have to pay taxes again. Let's say you have a dry-cleaning business. Who's to say it couldn't be a church that baptizes clothing?" Jan Marcusse charged her clients to set up sham 508 churches through which those clients operated their businesses, assigned their paychecks, and even invested millions of dollars in Access Financial Group.
Jan Marcusse's Access Financial Group offered investors (victims) huge "guaranteed" tax-free returns on their investments, and she did so in the name of God. Instead of a legitimate investment, Jan Marcusse's victims got taken to the cleaners where they got "baptized" in a Ponzi scheme. Over $20 million are now missing. Jan Marcusse subsequently had her offices raided by the IRS and all her client records seized. Now her 508 sham church clients face tax investigations by the IRS. Criminal indictments have been issued against Jan Marcusse, her office staff, and key promoters of her Ponzi scheme.
Hundreds are hopeful that Jan Marcusse and her coconspirators will receive lengthy jail sentences. However, it could very well be that the prosecution will have few cooperative victim witnesses that they can call; this in spite of the fact that there are over 600 victims.The Jan Marcusee scam was well engineered to dissuade victims from testifying against her. It started with her convincing people to commit tax fraud by structuring sham churches. They knew, or should have known, that what they were doing was criminal, but they allowed their own greed to get the better of them. When they subsequently got scammed on their "investments" with her, the last thing they are likely to do is to go to the government, whom they know is likely to then investigate them for tax fraud. Jan Marcusse has her own web site, that some may find interesting.
2. It's for good reason they tell their clients not to apply for 501c3 status -- most of their clients would never qualify as a real church. 508 mandatory exception provisions in the tax code are specifically and exclusively set aside for real churches. So if you couldn't qualify under 501c3 guidelines, you don't qualify under section 508 either.
501c3 Tax-Exempt Status: 501c3 Tax Exempt Status and the Church