Business as Mission Legal and Structural Framework
Legal and Structural Checklist for Business as Mission in YWAM
A business as mission initiative started by YWAM staff that is intended to operate as a for-profit business must be legally registered (or incorporated) and operated separately from YWAM. In the eyes of the law it must be distinct from any other existing charitable/non-profit entity registered by YWAM or YWAMers (whether these are overtly using the name of YWAM or not).
A distinction between for-profit entities and those registered as charitable/non-profit exists in the laws of every country to ensure the appropriate regulation and taxation of each kind of activity.
In addition, for YWAM we want to ensure that:
- There is protection from YWAM leaders or the YWAM entity from any legal or financial liability of the business/company.
- The business operates separately, with a separate structure, separate money (financial accounting) and separate leadership roles.
- There are no unintentional infringements of laws or tax rules by YWAMers.
See also additional notes
- Find out the legal and tax requirements appropriate for type of business/ company you plan to operate according to the government of the country, state or locality of operation. Competent legal and tax advice is a critical part of any business as mission enterprise undertaking. For further help, see additional notes.
- Make sure there is a clear separation between the financial accounting of the business and the accounting for any other non-profit YWAM activity or ministry. Separate accounts for separate legal entities are required by law. In all practices ensure there is no mixing of accounts or possibility for confusion between finances or financial record keeping. Donors should have a clear understanding about what they are giving to -- whether to the charitable entity or the business entity. In most jurisdictions there will be restrictions on the use of gifts given to ministry operations/ charitable entities that have had tax benefits for the original donor or the receiving charity -- these restrictions must be adhered to.
- In addition, to avoid any conflict of interest, the leadership and structure of the business should be clearly distinctive from the leadership and structure of the wider YWAM ministry in that location. An incorporated business will usually require a legal board and executive who should provide the leadership for the business operations. Although some people may be involved in the leadership of both, the structure should not be identical.
- There should be no confusion about use of assets, names and logos between the wider YWAM ministry and the business as mission company/business. The business should not use Youth With A Mission or YWAM (or any other term that identifies YWAM in a particular language or nation) in it's name or use the YWAM logo in any part of it's business logo. Sharing of assets, resources or facilities should always be described by a rental agreement.
- Use the memo of understanding (and where necessary other written statements) to describe and make clear the relationship between the business/company and YWAM. This is both to bring clarity between all parties and also to make sure there is no liability of one side for the other.
- Additional introductory notes: The way that this separation is achieved will depend on the existing status of YWAM and the type of business that is to be registered. If the activities of Youth With A Mission have been registered as a charitable or non-profit organisation in the nation or locality in any form, they will have to abide by laws and tax regulations relevant to such entities. Charitable/ non-profit organisations, by virtue of their charitable goals and purposes, are exempt from having to follow certain regulations or pay certain taxes that must be paid by for-profit business entities. If certain kinds of business activities are in fact being carried out by a tax-exempt non-profit/charitable organization, whether knowingly or not, the organization may either endanger its charitable status, or it must declare the income derived from the business activity and pay the required taxes. This prevents non-taxed entities from unfairly competing with businesses. Under the laws of most nations, it may be permissible for a charitable non-profit organisation to carry out certain small-scale business activities that are directly related to their core charitable purposes without business tax laws and regulations applying. However, BAM companies will often not be able to fall under this category and in any case this is a difficult area which requires detailed and competent legal advice. Therefore, in order safeguard YWAM and avoid any reproach, the YWAM principle goes beyond this to state that a for-profit business as mission initiative must always be registered as separate legal entity. If the BAM initiative is for non-profit activities only e.g. training and equipping others, and there is no direct involvement in for-profit business, there may be the option to operate under a previously registered YWAM/charitable/non-profit entity if this is appropriate and desirable for all involved.
- Finding help on the legal and tax requirements for a business/company: You must find out about the laws and regulations that: a) cover the process of registration or incorporation for a new business/company e.g. registration of business trade name, requirements for a business license or permit, establishing a board of directors, registration with tax authorities etc. and, b) cover the responsibility of the business owner(s) or company throughout operations e.g. income taxes, social security or similar local taxes, allowable tax deductions, liability and business insurance, employer responsibilities etc. Regulations may vary depending on a) the size of the business/company -- which could be determined by number employees, net worth, annual turnover or a combination of these; and b) the type of business/company. Each country or jurisdiction will specify the forms that a business can take, and a body of commercial law will have been developed for each type. Some common types include: Sole trader/proprietor -- one person goes into business and the liability of the business rests with their personal assets, thus the business has no separate existence from its owner legally. There are not many legal requirements to forming the business apart from perhaps a registration with tax authorities. Partnership -- a type of business entity in which partners share with each other the profits or losses of the business undertaking in which they have all invested, it is like a sole trader except the ownership and liability is shared by two or more individuals. There are usually a few legal requirements. The partners will have a verbal or written partnership agreement. Company or corporation refers to a legal entity that has a separate legal identity from its members, and is ordinarily incorporated to undertake commercial business. Usually the liability of the members assets are limited in some way thus most are known as: Limited liability Companies -- there are likely to be a few different kinds of limited company allowable under the laws of the country depending on whether the shares are owned privately or publicly (bought on the stock exchange) and how the liability of the members of the company is limited e.g. by the value of shares or guaranteed by a set amount. The particular terms for these kinds of business entities will obviously vary with language and the particular laws of each country. Further help can be found at business advice centres or from the tax departments of the country of operation. Other resources: www.doingbusiness.org -- World Bank site, provides searchable database of business regulations for each country in the world. www.wikipedia.org -- Provides definitions and abbreviations for types of company in many countries, see entry on 'types of companies'; other useful entries on: business, legal entity, companies, commercial law, corporations. www.bplans.com -- see legal advice section. Also try using an internet search engine for topics such as 'small business advice' or 'sole proprietorship' or 'company type' to find general and localised information.
- Leadership and structure of a YWAM location and business as mission: If the BAM initiative is the only YWAM team in a location then this does not immediately apply. However, the principle here is to avoid a leader having conflicts of interest or wielding too much authority -- for both business and spiritual oversight in the life of their team. Care should be taken that responsibilities are spread and that there is avoidance of an employer-employee dynamic within the YWAM team involved in the business. Another principle relates to the perception of the identity of YWAM by outsiders, the community or church, this is especially relevant were YWAM operates visibly. YWAM must not be primarily perceived as a business rather than a charitable non-profit organisation and care should be taken over the leadership and structuring of each for this reason. The most senior or prominent YWAM leaders in a location must not be perceived primarily as business people in these nations. The leadership team of the BAM initiative will be both accountable to their YWAM line leader in the usual way for their ministry goals and may also accountable for the operations of the business to a legal board (if required). The business and ministry goals should be integrated and though there may be tension at times between these, there should not be ongoing fundamental conflict. Thus any executive, advisory group or board for the business should be fully aware and sympathetic to the ministry goals from the start and this group may contain a number of YWAMers. More teaching on these topics will be available on www.businessasmission.com.
- In some cases either YWAM or the business or both may not be incorporated as a legal entity aside from it's members (e.g. where the activities of YWAM do not have a formal registration in a country or where the business will operate as sole proprietorship or partnership). Especially in these cases, use written statements to make clear the separation between the non-profit elements of the organisation and the business side.