Approximately 65 percent of churches have seen a decline in giving during the COVID-19 pandemic. Before it is all over, as many as one in five may be forced to close their doors.
For this reason, many congregations have reevaluated how they generate income and how they use it. This has led to innumerable conversations (online and otherwise) around the question, “Is a church a business?”
The answer to that question depends on how you define “business” and what activities you associate with it. The reality is that churches share many characteristics with businesses and can benefit from savvy business practices. Keep reading to find out where these two areas overlap and where they are distinct.
Is a Church a Business?
Under the federal Tax Code, churches are not considered businesses, but 501(c)(3) entities. If a religious organization meets the qualifications of this categorization, they receive tax-exempt status. This distinguishes a church from a religious business that does not meet such criteria.
Beyond that formal distinction, the easiest way to break this question down is to look at similarities and differences. Each of these will be unique to a particular congregation.
How a Church Is Not Like a Business
While churches need money to carry out various activities, most ministers and church members would say that their goals are part of something bigger. Whereas a business’s main goal is to offer goods or services in exchange for payment.
That’s not to say that owners or employees cannot be invested in the things they provide, but payment for them is inextricably tied to the existence of the company. You may be passionate about cutting hair, but if you decide not to charge for it, that enterprise will not last very long.
Conversely, a congregation may make decisions that are not merely about making money. These are centered around their mission or “calling.”
Nor does a church literally exchange services for money. A church may ask congregants to make pledges or commit a certain percentage of their income (a “tithe”), but there is nothing legally binding about such arrangements.
Church members do not have to give, and they can stop giving at any time. You cannot go to any business––a restaurant, mechanic, accountant––and expect to receive services but only pay what you want (or nothing at all).
How a Church Is Like a Business
Regardless of how big or small a church is, there are many business aspects to its daily operations. One of the main ones is the need for budgeting. A church budget is a reflection of its values, but it is also a way to plan, accomplish goals, and fund specific ministries.
Church leadership must determine where money will come from and how it will be spent. Things like keeping up with church lighting or HVAC systems cannot be overlooked. Regardless of the size of the church, money is necessary for the basic costs of maintaining the building and grounds.
Like businesses, investing in the church can yield better outcomes. Whether we like it or not, money is important to carry out its mission and ministries. A business structure can help improve the church’s ability to achieve goals, grow, and do more within their community.
Learn More About Religion and Business
We hope this information helped shed some light on the question “Is a church a business?” Come back for more insights on business topics related to religion, technology, health, and many other issues.