In Iowa, How Do You Dissolve a Nonprofit Corporation?

Learn how to dissolve a nonprofit company in your state.

Do you need to dissolve your Iowa nonprofit corporation? Here’s a rundown of the major actions you’ll need to do. This article solely discusses the most fundamental kind of voluntary dissolution of an existing Iowa 501(c)(3) nonprofit company. Other forms of nonprofits have distinct regulations and processes, as do other circumstances such as forced dissolution.

Dissolution Authorization

Closing begins with dissolution, and you will need a determination to dissolve to do so. The resolution should contain a dissolution plan outlining how the nonprofit’s residual assets will be allocated after all creditors have been paid. With the resolution and strategy in hand, Iowa law allows for voluntary dissolution in the following manner:

If your nonprofit has members, by action of the directors followed by a vote or other permission of the members; otherwise, by a vote of the directors.

The first option requires the board to approve the resolution, including the plan, before submitting it to the members. Members then gather and vote to ratify the dissolution. Members may also offer written agreement for the dissolution.

The resolution and plan must be approved by the board alone under the second procedure. The majority vote of the directors in office at the time of approval is the default norm.

Make careful to accurately document the resolution to dissolve, the plan of dissolution, the votes of the directors, and, if required, the votes or written consents of the members. This information will be required for filings with the state and the IRS.

Dissolution Articles

After your board of directors (and, if appropriate, voting members) has authorized the dissolution, you must file articles of dissolution with the Secretary of State (SOS). The articles of dissolution must include the following:

the name of your NGO and the date of dissolution
a statement that dissolution was approved by a sufficient vote of the board if approval by members was not required, a statement to that effect and a statement that dissolution was approved by a sufficient vote of the board if approval by members was required, (a) the designation, number of memberships outstanding, number of votes entitled to be cast by each class, and number of votes of each class indisputably voting on dissolution; and (b) either the total number of votes entitled to be cast by each class

There is no state-issued form for articles of dissolution; you must create your own. You should think about hiring an attorney to help you. A filing fee of $5 is required.

Winding Down

After your nonprofit has legally approved dissolution, it continues to exist merely for the purpose of completing certain last tasks known as “winding up” the firm. Winding up is primarily concerned with paying off any obligations and then distributing any leftover assets, although additional responsibilities may be included.

In general, you may distribute money and property only after you have paid off all of your nonprofit’s obligations. Then there are certain regulations to follow when it comes to asset distributions. For example, your nonprofit is required to return any things leased to it on the condition that they be returned upon dissolution. A dissolving 501(c)(3) organization must also disperse its remaining assets for tax-exempt purposes after paying off obligations and repaying borrowed assets. In reality, this generally entails donating assets to another 501(c)(3) charity or organizations. Other distribution obligations, such as items in your plan of dissolution, may also apply. If you have any concerns, you should speak with a lawyer.

Creditors and Other Claimants Should Be Warned

Giving notice to creditors and other claims is another aspect of winding up your dissolved charity. It is not required to provide notification. However, doing so will assist reduce your obligation and enable you to make final dispositions of residual assets more securely. After dissolution, you may send notification to known claims. You may also notify unknown claimants by posting a notice in a newspaper.

Note on Federal Taxation

You must submit IRS Form 990 or IRS Form 990-EZ for federal tax reasons. Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) must be completed, as well as copies of your articles of dissolution, resolution to dissolve, and plan of dissolution. When filling out Form 990 or Form 990-EZ, tick the “Terminated” box in the header section on Page 1 of the return.

Further Information

The SOS website has further information such as forms, postal addresses, phone numbers, and filing costs.

Be careful that dissolution will not put an end to any litigation initiated by or against your organization prior to dissolution. Furthermore, depending on the circumstances, fresh legal proceedings by or against your organization might be initiated up to five years following dissolution.

This article only covers the most fundamental procedures of voluntary dissolution once your organization has begun operations. There are several further, more specialized regulations that address topics such as:

uninvited dissolution
dissolution prior to beginning operations
dissolution of unusual nonprofits (for example, so-called mutual benefit corporations)
what particular components should be included in a dissolution plan that provides sufficient prior notice of member and director meetings
the needed number of votes from members or directors to authorize dissolution
How to expressly agree dissolution in writing without a meeting; what information must be included in notifications to creditors; and how to react to legal claims after dissolution.

Furthermore, your articles of incorporation or bylaws may incorporate restrictions that apply instead of or in addition to state law. You are highly advised to speak with a lawyer for further information on these and other issues.