How to Dissolve a Connecticut Nonprofit Corporation

Learn how to dissolve a nonprofit company in your state.

Nonprofit companies in Connecticut are one form of Connecticut nonstock company. In contrast to a traditional for-profit business, a nonstock corporation does not issue capital stock. The statutes governing the dissolution of nonprofit companies are included in Connecticut’s more general nonstock company legislation.

Dissolution Authorization

Closing begins with dissolution, and you will require a proposal to dissolve to do so. You’ll also need a distribution plan, which details how the nonprofit’s leftover assets will be allocated once all creditors have been paid. With the proposal and plan in hand, Connecticut 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 accept the request to dissolve before submitting it to the members. The members then gather and vote on whether or not to adopt the idea. Members may also grant unanimous written agreement for the resolution without meeting. The process for approving a distribution plan is roughly the same.

The board must approve the request to dissolve using the second procedure. The proposal must typically be approved by a majority vote of the directors. The method for approving a distribution plan is the same.

Make careful to accurately document the request to dissolve, the plan of distribution, 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.

Certificate of Divorce

You must submit a certificate of dissolution with the Secretary of State once your nonprofit has authorized dissolution (SOS). The certificate of dissolution must include the following information:

If dissolution was approved by members, a statement that the proposal to dissolve was duly approved by the members in the manner required by the Connecticut Revised Nonstock Corporation Act and the certificate of incorporation; and if dissolution was authorized by the board of directors without member approval, a statement that the dissolution was duly approved by the board of directors and that me

A blank certificate of dissolution form may be downloaded from the SOS website. There is a $20 filing fee.

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. Also, you must receive statements from the Department of Revenue Services (DRS) and Department of Labor (DOL) before making any final disbursements. The statements must demonstrate that your organization has paid all necessary taxes and contributions, or that it is not obligated to pay any taxes or contributions. To get a letter of good standing on state business taxes, for example, utilize DRS Form TPG-170 (Business Taxes Status Letter Request). You should contact the DRS and DOL for further information.

There are various regulations that must be followed while distributing assets. 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 criteria, such as those in your distribution plan, 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. A completed Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) must be included, as well as copies of your certificate of dissolution, proposal to dissolve, and plan of distribution. 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

Additional information, including as forms, postal addresses, phone numbers, and filing costs, may be found on the SOS, DRS, and DOL websites.

Litigation initiated by or against your organization prior to dissolution will not be halted. Furthermore, additional legal actions may be brought by or against your organization for up to three years following its 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
what precise goods should be included in a distribution plan
providing enough 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 charter of incorporation or bylaws may include regulations 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.