How to Dissolve a Nonprofit Organization

Dissolving a nonprofit organization is a complex process that requires careful planning and execution. Stakeholders must take steps to avoid any legal or financial problems. In this article, GrantWatch will explain the process of dissolving a nonprofit organization and share some tips and resources to help you through the process.

Step 1: Determine the Reason for Dissolution and Write a Plan

Before you start the process of dissolving a nonprofit organization, you want to make sure you are doing it for the proper reason and you are sure you want to go through with it. There are several reasons why an organization might choose to dissolve, including:

  • This organization has achieved its mission and no longer needs to exist.
  • The organization can no longer operate effectively due to financial or other problems.
  • An organization’s board of directors has decided to dissolve the organization.

Once you have determined the reason for the dissolution, you can begin to develop a plan for how to proceed. This needs to be a written plan that goes into step-by-step detail of how you plan to proceed next.

Step 2: Make Sure Everyone Is on Board

After you have written up a formal plan of dissolution for the nonprofit, the next step is to present it to your Board of Directors and ask for a vote. In order to move forward, the board will have to agree that this is the right course of action to take. The exact number of votes you need from the board differs depending on your bylaws.

Step 3: File the Articles of Dissolution

If your board comes to a consensus about the dissolution, you will then need to file the Articles of Dissolution with the state in which the organization is incorporated. The Articles of Dissolution will include information about the organization, such as its name, address, and date of incorporation. It must also contain a statement sharing the reason for the dissolution.

Step 4: Notify All Interested Parties

Once the Articles of Dissolution are filed, the organization must notify all interested parties of the dissolution. This includes donors, sponsors, volunteers, and other shareholders. You could do this by sending a letter or email or publishing an official notice in a local newspaper. You also want to make sure to share it on your social media pages and website, so that any new donors or volunteers are aware.

Step 5: Pay Off All Debts and Liabilities

The next step is to pay off the organization’s debts and liabilities. This includes any outstanding loans, taxes, or other obligations. The organization’s assets can be distributed once all debts and liabilities have been paid. The assets will be distributed to the organization’s members, donors, or another nonprofit organization with a similar mission.

Step 6: Inform Relevant State Agencies

You will also need to tell the proper state agencies that your nonprofit will be closing its doors. This includes the state agencies that you registered with when you created your nonprofit. Some of these agencies may include the state taxation office or the state department of labor. If you are not sure who to contact, you can reach out to your state Attorney General for guidance.

Step 7: File the Final 990 Form

The last step in this process includes filing a final 990 Form with the IRS. This form is due within 5 months and 15 days after the last day of the nonprofit’s fiscal year. However, if you are dissolving your nonprofit before the end of the fiscal year, you can file this last 990 form as soon as you have completed all the requirements from the state.

Extra Tips

  • Start the process early. It can take several months or even years to dissolve a nonprofit organization, so starting the process early is essential.
  • Get professional help. If you’re unfamiliar with dissolving a nonprofit organization, hiring an attorney or accountant to help you is a good idea.
  • Be organized. Keep careful records of all financial transactions and other vital documents. You will need these when it comes to paying off debts and liabilities.
  • Communicate with your stakeholders. Keep your members, donors, and other stakeholders informed of the dissolution process.

Resources for Dissolving a Nonprofit Organization

  • The National Council on Nonprofits website has a page on dissolving a nonprofit organization.
  • The IRS website has a page on closing a nonprofit organization.

Dissolving a nonprofit organization is complex but can be done with careful planning and execution. By following the steps outlined in this blog post, you can ensure that dissolving your organization goes smoothly.

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