How to Keep Your Church Compliant & In Good Standing (Maryland Edition)
There are only a few rules in Maryland for a legal entity to remain compliant with State requirements. Unfortunately, a variety of reasons including inattentiveness to legal matters, staff turnover and lack of knowledge, yields a high number of non-compliant entities. Though lack of good standing and non-compliance can be rectified, it poses an otherwise unnecessary expense for entities such as churches that often need to count their pennies. And, more importantly, it can cause liability exposure for church leaders personally. Here is what you need to know:
Name of the Entity. An entity should use its full legal name as listed in State Department of Assessment and Taxation (SDAT) on all legal documents, letterhead and signage. This includes bank accounts, deeds, leases, contracts, etc. If you wish to change the entity name, Articles of Amendment must be filed with the State, together with a resolution or affidavit stating that the change was legally adopted by the entity. To review an entity's legal name, address, resident agent or good standing status, visit here.
Place of Business. Any change in the main address for an entity must be communicated to SDAT using the Change of Address form available here. [$25]
Resident Agent. Every entity must name a Resident Agent upon forming and keep the name and address of the Resident Agent current. Any changes to this must be communicated to SDAT using the Change of Resident Agent form. Note that this is the same form as the Change of Address above using the same link and both can be changed on one form for one cost. [$25] These 2 changes can also be included in Articles of Amendment filed for any other purpose.
Personal Property Return. Every Maryland entity is required to file this return annually by April 15th. Nonprofit entities such as churches have the $300 filing fee automatically waived. Additionally, nonprofits are exempt from taxes on personal property. Failure to file this report will cause an entity status of “not in good standing.” Entities that remain not in good standing for too long are in danger of being administratively forfeited by the State. While not in good standing status, an entity can file all missing returns. There is no penalty for a late filing for nonprofits. Once forfeit, an entity must file all missing returns and file Articles of Reinstatement. [Cost is currently $100]. However, more importantly, once forfeit, the corporation (or other entity) is defunct and thus provides no protections to individuals who act as agents for that entity. If someone is harmed by the negligence, the liability will fall directly on the governing board members and other leaders personally because there is no legal entity to shield them.
Compliance Officer. Every entity should either have a compliance officer or list compliance tasks in someone's job description. The Board, responsible to oversee administration of the entity, should check annually to ensure full compliance.
Contact Erika E. Cole, Esq. The Church Attorney®, for legal assistance at 410.654.4300.
This information is being provided to you by the attorneys in the Churches & Faith Based Organizations Group of Whiteford, Taylor & Preston, LLP. This information is general legal information; it is not legal advice pertaining to your specific legal matter. Laws vary based on jurisdiction. If you are in need of legal advice, you are advised to contact an attorney licensed in the jurisdiction in which your church is situated to provide advice directed to your particular issue and circumstances.