Corporation Sole Problems
by: Peter Kershaw, © 2004, All Rights Reserved
The corporation sole is experiencing explosive growth as a direct result of aggressive promotional efforts, primarily through the internet, by dozens of corporation sole sales companies. Thousands of new corporation soles have been formed in the past several years, and that growth continues.
The corporation sole is being recommended by its promoters as a way of organizing “churches” and for other “ecclesiastical” purposes. If really used for such purposes, one may be able to justify doing so on a purely “legal” basis, since the corporation sole is a valid and legally recognized corporate entity.
A major problem, however, lies in the fact that all the corporation sole promoters misrepresent the legal attributes of the corporation sole. Rather than recommending it for exclusively legitimate religious functions, corporation sole peddlers also sell it as an attractive vehicle for personal and business use. This allegedly includes tax immunity, asset protection, estate planning, etc. Of the thousands of corporation soles that have been formed in recent years, the vast majority appear to be shams that have little if any legitimate religious purpose.
No doubt there is at least a small percentage of recently formed corporation soles that have been organized by legitimate pastors and ministers who have no intention of using the corporation sole to game the system. In point of fact, corporation sole peddlers often specifically target real churches because they provide multiple sales opportunities. After they convince the pastor to reorganize as a corporation sole, then they turn their attention on selling individual members of the church their own corporation soles, as well.
Corporation sole peddlers claim that anyone who has a “ministry” legally qualifies to have a corporation sole and, thereby, obtain all the alleged tax benefits. But what is a “ministry?” According to corporation sole peddlers “ministry” includes just about every conceivable activity that a Christian or, if you’re not a Christian a “religious person” (corporation sole peddlers aren’t especially picky about their clientele), would ever engage in, including investments and profitable business ventures.
Upon an exhaustive review of a plethora of corporation sole marketing materials, it quickly became apparent to me that the terms “church” and “ministry” are really just being used for a cloak, as a front, as window-dressing to disguise (and not so cleverly) the actual intentions of the corporate sole peddlers. The claims being made about the corporation sole by its touters often have little or nothing to do with real churches, and more to do with twisting and completely redefining well- understood words and phrases.
There’s nothing new about this hoax. Corporation sole promoters are just putting a new twist on an old tax scam — the religious ordination mill. For many years people have sought so-called religious ordinations from religious ordination mills, such as the Basic Bible Church Of America, generally for no other reason than to obtain some mythical tax advantage.
The IRS began issuing Revenue Rulings some years ago (e.g. Rev. Rul. 78-232, Rev. Rul. 81-94, Rev. Rul. 89-74), warning about religious ordination mills and “mail order churches.” The IRS has long made it clear that participation in sham ministerial ordinations, and sham church schemes, would result in the most unpleasant of consequences.
The theories that corporation sole promoters are peddling today are no different than the theories that the clients of mail order churches tried using decades ago. Many of those folks went to jail, and many more lost all their assets to the IRS.
The results are proving no more favorable for purchasers of the corporation sole.
It is not my intention here to pass judgement upon the ideology of corporation sole promoters. Some of them (at least those few that aren’t common hucksters and swindlers) have a genuine passion for personal liberty and the reestablishment of constitutionally-constrained and limited civil government. On that point we would have something in common.
However, corporation sole peddlers universally suffer from an inability to think logically or to reason cogently and in a way that is intellectually honest. They suffer from reasoning that is driven by ideological wishful thinking, rather than objective thinking. Drawing any conclusions based upon wishful thinking often has disastrous consequences.
Another form of logic commonly employed by corporate sole peddlers is known as “hasty generalization” and “weak analogy.” Here’s just one example, in the form of a syllogism:
- Position Statement: All churches are automatically tax exempt.
- Position Statement: Many corporation soles are churches.
- Conclusion: All corporation soles are automatically tax exempt.
Both position statements are true. The conclusion, however, is false. It should be apparent why such logic is flawed; but many folks who purchase a corporation sole have missed it altogether.
Given the intense frustrations that millions of Americans have with the federal income tax system, any claims corporation sole peddlers make of being able to obtain personal tax immunity are bound to elicit considerable interest. Even former President Ronald Reagan was openly critical of the personal income tax system:
“Our federal tax system is, in short, utterly impossible, utterly unjust and completely counterproductive. The present system of taxation reeks with injustice and is fundamentally unAmerican. It has earned a rebellion and it’s time we rebelled!”
President Ronald Reagan, Williamsburg, Virginia (May 1983)
Mr. Reagan gave some wonderful and inspiring speeches, but he often didn’t do a very good job of delivering on promises. Under his leadership, the federal income tax code became far more complex than it had ever been, and the tyrannies of the tax authority were not in any way reined in. Taxpayer frustrations have only increased since the Reagan Administration, and millions are looking for a way to “get out of the system.”
Emotions are running high for the multitude of Americans who view the federal income tax system as corrupt, unconstitutional, socialistic (if not communistic), and the antithesis of government of the people, by the people, for the people. Along come the tax protesters with a new “silver bullet” that they claim will slay the tax monster — the corporation sole. One might easily be caught up in all the excitement and fervor. After all, what could be more exciting than the opportunity of finally being delivered from oppression and tyranny, into a status of liberty and personal freedom?
But it’s just that sort of emotionalism that often gets people into very serious trouble, because emotionalism can often undermine clear thinking. Americans today are more of an emotional lot, and far less of a thinking, rational people, than at any time in our history. This is not by accident, but by design. Most of us have been conditioned that way by our public schools, our television, magazines, books, movies, music, recreation, politics, and seeker-friendly purpose-driven entertainment-obsessed churches. Advertising permeates all of it, and advertising is mainly about eliciting an emotional response.
Emotionalism sells. Rationalism jeopardizes sales. Advertisers would rather that you not think. They’d rather you part with your hard-earned money as an “impulse buyer,” based upon some happy feeling they hope to conjure out of you.
It’s just that sort of hyped emotionalism that is responsible for the rapid growth in the corporation sole industry; and where there’s money to be made, you can be sure there will be salesmen there to sell it. Given the kind of easy money that can be made, it’s little wonder that so many common peddlers (and even a few common hucksters and charlatans) have jumped into the fray to hype the corporation sole. Many of them are relatively new to “the freedom movement.” In their ignorance, they believe they’re offering and doing something that has never been done before:
“The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.”
Little do they realize that there have been dozens of other “silver bullets” marketed from long ago, decades before they ever learned that the personal federal income tax was “voluntary.” None of those silver bullets worked any better (or worse) than the corporation sole silver bullet. This is not a slam against tax protesters. Tax protesters are doing an admirable job of exposing the injustices of not only the tax system, but unconstitutional government, in general. However, they have much to learn when it comes to offering the typical American family a viable solution for living outside the system. The reality is, there is no silver bullet.
Ethical and Competency Problems
The corporation sole is being puffed by a plethora of peddlers via the internet, as well as by MLMs and network marketers, various seminar companies and, as we’ve mentioned, tax protesters. While we have no animus towards salesmen in general, we need to point out that when dealing with inherently complex subjects, such as the technical attributes of legal entities, taxation, jurisdiction, etc., it would be most unwise to take the word of a mere salesman.
Furthermore, many salesmen are prone to puff the product they sell, disclosing only the “benefits” but hiding from the customer the pitfalls. This is especially apparent in all the hype about the corporation sole. There are numerous pitfalls to the corporation sole, but we have yet to see a corporate sole peddler mention even a few.
Many salesmen not only puff their product, but they also puff themselves, claiming they possess certain skills and aptitude, which they simply do not have. This too is widespread among the corporate sole peddlers. Many of them claim they possess legal expertise when, the reality is that few, if any, of the corporate sole peddlers retain any genuine legal acumen at all. Few of them could negotiate their way around a law library, or know how to perform competent legal research. As such, few of them have personally performed any serious research on the corporation sole for themselves. Most of the corporate sole peddlers have just stolen and plagiarized their materials from others.
One example of this thievery hits all too close to home for me personally. I speak here of the plagiarist and self-proclaimed “Prophetess,” Elizabeth Gardner of Beth-El Aram Ministries (or Bethel Aram Ministries and Beth Aram Ministries). Elizabeth Gardner used without my permission, and without any attribution whatsoever, some ten pages of my book, The Modern Church: Divine Institution Or Counterfeit? (published in 1993) in her booklet, Corporation Sole vs. 501(c)(3) Corporation. In the publishing world this is referred to as “plagiarism.” Referring to someone, such as Elizabeth Gardner, as a plagiarist is a polite way of calling them a thief.
A plagiarist is a thief and he knows he is a thief. . . He invariably gives himself away. His explanations are so full of holes and “becauses” that you can see right through them into the thieving heart of him. A thief talks like a thief.
Maurice Salzman, Plagiarism: The ‘Art’ of Stealing Literary Material (1931), pg. 68
Years ago I confronted Elizabeth Gardner, and her husband Ric Gardner, over the matter. However, they denied doing anything improper, nor would they heed my demands to cease using my writings. Not only is Elizabeth Gardner a plagiarist, she used my writings in order to profit from an agenda that I am hardly in agreement with. Elizabeth Gardner has done so to line her own pockets, yet she has not ever paid me a dime in compensation for the ten pages of my book that she stole.
Elizabeth Gardner is not the exception, but rather, tends to be the norm among corporate sole peddlers. Little in the way of honor or original thought (as evidenced by all the plagiarism) is apparent among corporation sole peddlers. One should give careful consideration before working with an industry that is fraught with people so lacking in ethics.
Moreover, when it comes to legal acumen, corporation sole peddlers are renowned for claiming expertise which they do not possess. Again, Elizabeth Gardner is a perfect example. Here is a woman who claims to be a “legal researcher,” a “paralegal,” and “author.” Apparently her idea of “research” and being an “author” is to steal the papers and books of others and then republish them as her own, and then hold herself out to the public as an “expert.” This pattern is commonplace among corporate sole peddlers.
As such, the purchaser of the corporation sole should think through very carefully where they plan on getting their legal support for the many legal questions and issues that are bound to arise after they make their purchase. Chances are they won’t be getting competent legal advice from the salesman they bought their corporation sole from. Salesmen serve an important role in our society, but our expectations of them need to be realistic.
Furthermore, the political philosophies of many (and perhaps most) of the corporate sole peddlers make them high-profile with the government. When government agencies put out news releases announcing another injunction, raid, asset seizure, or indictment against a corporate sole promoter, they almost always make mention of the fact that they are also a tax protester, or militia member, or white supremacist, etc. Many of them also have prior felony records.
Corporation sole promoters are certainly entitled to their opinions, even if their opinions are seriously flawed (indeed, their opinions are protected by the First Amendment). However, all corporation sole promoters are, by the very nature of their beliefs and practices, on the government radar screen and will attract government scrutiny. One should think through very carefully the company one keeps. The modus operandi of government investigations and prosecutions is often based upon guilt by association (prosecutors call it “conspiracy”).
Corporation sole promoters claim that the corporation sole is the greatest thing since sliced bread (falls jelly-side-up every time) for “operating outside the system.” However, an indispensable prerequisite for successfully “operating outside the system” is maintaining a low profile. In other words, if you plan on operating outside the system, don’t ever engage in conduct which draws attention, scrutiny, or a government investigation, and keep your distance from those who are high-profile. Those who plan on exiting the system had better do so cautiously, quietly and unobserved.
The mere creation of a corporation sole makes it impossible to be low-profile. The moment you make application with your Secretary Of State’s office and form a corporation sole, it becomes a matter of public record. There has been so much abuse of the corporation sole in the past several years, it would be naive to assume that “the system” isn’t paying close attention every time a newly-formed corporation sole is registered.
Even the press, and certain investigative reporters, are paying attention to the corporation sole, and what they’ve had to say of the corporation sole, and the character of the folks who promote them and who use them, hasn’t been very favorable.
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