Introduction to Nonprofit Dissolution
Dissolving a nonprofit corporation involves a series of steps that must be followed to ensure compliance with state and federal laws. The process begins with a vote by the board of directors to dissolve the organization, which must be recorded in the minutes of the meeting.
The next step is to file articles of dissolution with the state, which provides public notice of the organization's intention to dissolve. This is typically done with the state's business registration office, such as the Secretary of State.
Filing Articles of Dissolution
The articles of dissolution must include the name of the nonprofit corporation, the date of dissolution, and a statement that the organization has been dissolved. The document must be signed by an authorized representative of the organization, such as the president or CEO.
The filing fee for articles of dissolution varies by state, but it is typically a nominal fee. The document must be filed with the state's business registration office, which will review the document for completeness and accuracy.
Notifying the IRS
In addition to filing articles of dissolution with the state, the nonprofit corporation must also notify the IRS of its intention to dissolve. This is done by filing Form 990, which is the annual information return for tax-exempt organizations.
The Form 990 must include a statement indicating that the organization has been dissolved, as well as information about the distribution of the organization's assets. The IRS will review the form to ensure that the organization has complied with all tax laws and regulations.
Distributing Assets
When a nonprofit corporation dissolves, its assets must be distributed in accordance with state law and the organization's bylaws. This typically involves distributing assets to other tax-exempt organizations, such as charities or foundations.
The distribution of assets must be reported to the IRS on Form 990, which includes a schedule of assets and liabilities. The organization must also obtain a written acknowledgement from the recipient organization, which must be filed with the IRS.
Final Steps
Once the nonprofit corporation has filed articles of dissolution and notified the IRS, it must take steps to wind up its affairs. This includes paying off any outstanding debts, closing bank accounts, and canceling any contracts or leases.
The organization must also maintain records of its dissolution, including minutes of meetings, financial statements, and tax returns. These records must be kept for a period of three years after the date of dissolution, in case of an audit or other inquiry.
Frequently Asked Questions
What is the first step in dissolving a nonprofit corporation?
The first step is to hold a vote by the board of directors to dissolve the organization, which must be recorded in the minutes of the meeting.
How do I file articles of dissolution with the state?
You can file articles of dissolution with the state by submitting the document to the state's business registration office, such as the Secretary of State.
Do I need to notify the IRS when dissolving a nonprofit corporation?
Yes, you must notify the IRS by filing Form 990, which includes a statement indicating that the organization has been dissolved.
How do I distribute assets when dissolving a nonprofit corporation?
You must distribute assets in accordance with state law and the organization's bylaws, typically to other tax-exempt organizations.
What records must I keep after dissolving a nonprofit corporation?
You must maintain records of the dissolution, including minutes of meetings, financial statements, and tax returns, for a period of three years after the date of dissolution.
Can I dissolve a nonprofit corporation without notifying the state or IRS?
No, you must follow the proper procedures for dissolving a nonprofit corporation, including filing articles of dissolution with the state and notifying the IRS.