Ask pastors if their church is a business or a ministry, and most will answer ministry without a moment’s hesitation. It is understandable, of course, because being identified as a ministry sounds spiritual, while being labeled as a business may sound secular, conjuring up notions of selling a product to make a profit. Furthermore, most pastors do not want to spend their days looking at spreadsheets; they want to serve and minister to people.
Admittedly, this is not a completely fair question. Churches and Christian nonprofits do not have to choose either/or—it is actually both/and. On the one hand, ignoring business principles can jeopardize a church’s sustainability. And, on the other hand, forsaking their mission for the sake of operation efficiency can compromise a church’s identity and God-given calling.
Balancing Act: Ministry and Business
Churches must find the sweet spot of navigating both ministry and business, learning how to traverse between two worlds that may seem at first glance to be incongruous. This involves embracing the wisdom of the marketplace while maintaining their spiritual mission.
Biblical Insights: Jesus and the Marketplace
Remember, Jesus Himself told us the Parable of the Talents (Matthew 25:14-30). A master gave one, two, and five talents to three of his servants respectively. The one-talent servant avoided making any deals with the bank, perhaps thinking he would maintain the purity of his ministry. Unfortunately, he ended up being rebuked by the master for not producing an increase. In other words, he neglected marketplace savvy.
There was also the time Mary of Bethany was anointing Jesus’ feet with extremely expensive perfume. Judas Iscariot, perhaps thinking he would play the role of the shrewd businessman, complained about Mary’s costly display. He, too, was rebuked for not prioritizing the mission of Jesus.
Legal Perspectives: The IRS and Ministry
In the United States, the Internal Revenue Service (IRS) classifies churches as 501(c)(3) organizations, which places them in a unique position. They are exempt from paying federal income taxes, and donations to them are tax deductible. The classification is indicative of the dual nature of churches: they are acknowledged for their nonprofit, charitable, and religious activities (ministry) and simultaneously recognized as organizations that must adhere to specific administrative and financial regulations (business).
The IRS does not require churches to file annual returns (Form 990), unlike other nonprofits, which further cements their status as special entities that are not purely business oriented. However, they must still maintain accurate financial records and can engage in income-generating activities, provided these are in line with their religious objectives and the proceeds go toward their exempt purposes.
Profitability in Nonprofits
The notion of profit is perhaps where the most significant tension lies with churches. Nonprofits are not supposed to make a profit, right?
Not so fast.
Churches and nonprofits can and should strive for profitability. The distinction is that any surplus in a church’s finances is expected to be reinvested in the ministry or cause, not distributed to private individuals, owners, or shareholders.
If anything, a church should aim to be the smoothest, best-run, most efficient organization in town. Churches employ staff, manage finances, own property, and engage in transactions. These organizational structures are necessary for the success of the mission.
To operate effectively, churches must embrace the practicalities and strategy of business without losing sight of their core purpose as ministries.
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