Learn how to dissolve a nonprofit company in your state.
If you decide to dissolve a Nevada nonprofit company, you must go through a dissolution procedure. A vote or other official authorisation, the submission of important paperwork with government authorities, and a number of additional actions known together as winding up and liquidating the company are all required for dissolution.
The particular methods for terminating a nonprofit organization will differ based on a few key factors. Keeping this in mind, the following limitations apply to this article:
It only applies to non-profit organizations (not all nonprofits are incorporated)
It only applies to nonprofits that have applied to the IRS and been approved specifically as 501(c)(3) tax-exempt organizations (not all nonprofits are tax-exempt, and not all tax-exempt nonprofits are 501(c)(3) organizations); and it only applies to voluntary dissolution based on a decision made by the nonprofit’s directors and, where applicable, the nonprofit’s members (a nonprofit may be involuntarily dissolved through a court order, or for administrative reasons such as failing to file a biennial report or pay required fees).
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Advantages of Formal Dissolution
The State of Nevada has recognized your nonprofit company. You will formally cancel that registration and, by consequence, the corporation’s existence via the dissolution procedure. A well-managed breakup accomplishes at least two significant aims. For starters, it will place your company out of reach of creditors and other claims. Second, it will enable you to meet your legal requirements for the correct disposition of any surviving corporate assets.
Dissolution Authorization
The nonprofit corporation act (“NCA”) of Nevada categorizes voluntary dissolutions into two types:
Those launched by the nonprofit’s board of directors; and those initiated by the nonprofit’s members.
The directors initiated the dissolution. The method for approving dissolution for dissolutions initiated by the directors will differ depending on whether your nonprofit company also includes members. (Whether you’re not sure if your nonprofit has members, go at your articles of incorporation, bylaws, or other comparable organizational papers.)
If your nonprofit has no members, the board must authorize dissolution. Specific regulations and procedures governing the board approval process should be found in your articles of incorporation and bylaws. In general, the board must pass a resolution to disband. (Depending on your articles of incorporation, the resolution may also need to be accepted by another person or organization.) You must submit a certificate of dissolution with the Secretary of State after the resolution has been accepted (“SOS”).
If your organization has members, your board must convene a meeting of the members to vote on the topic after adopting a resolution to dissolve. (Depending on your articles of incorporation, the resolution may also need to be accepted by another person or organization.) The meeting must be properly announced to members in advance. Approval needs the agreement of a majority of the members with voting power. After the resolution is approved by the members, you must submit a certificate of dissolution with the SOS.
Whether or not your organization includes voting members, be sure to correctly record the board’s resolution, the votes of the directors, and, if required, the votes of the members. This information will be required for filings with the state and the IRS.
Members’ plea for dissolution. A nonprofit may also dissolve voluntarily if a majority of its members (and any other person or organization whose permission is needed by the articles of incorporation) make a written request to do so. The request must include:
be written to the directors and describe reasons why the corporation’s affairs should be wound up; and identify three members to function as trustees in liquidation and winding up the corporation’s affairs.
The directors must receive a formal request. A copy of the identical request, as well as the relevant certificate of dissolution, must also be presented to the SOS.
Regardless of the method you take to voluntarily dissolve your organization, you should also establish a distribution plan that specifies how the assets of your nonprofit will be dispersed.
Please keep in mind that dissolution does not halt any ongoing legal proceedings initiated by or against your charity. Furthermore, dissolution does not prevent future lawsuits from being filed by or against your organization for up to three years following dissolution (the exact length of time depends on the details of the suit).
Certificate of Divorce
The particular certificate of dissolution you must submit with the SOS will be determined by how your nonprofit was dissolved.
If your nonprofit’s dissolution was approved by your board (and, if appropriate, members), your certificate of dissolution must include the following information:
a declaration confirming the dissolution was granted in accordance with the NCA; and a list of your nonprofit’s president, secretary, treasurer, and all directors’ names and addresses (home or business).
If your dissolution was the result of a written request from members, your certificate of dissolution should just include the name of your nonprofit and the filing date. Remember to provide the SOS a certificate of dissolution as well as a copy of the members’ written desire to disband.
The SOS website has a blank form for each sort of certificate of dissolution, as well as instructions and appropriate cover documents. For either form, the standard filing cost is $50. For a price, certified copies and different types of expedited processing are available.
Winding Down and Liquidation
After your nonprofit has legally approved dissolution, it continues to exist for the purpose of completing certain last tasks known as “winding up” and “liquidating” the corporation. It may be necessary to appoint one or more officers and/or directors to manage these issues.
Key winding-up and liquidation duties under the NCA include:
collecting the nonprofit’s assets, paying the nonprofit’s obligations, and distributing the balance of the nonprofit’s money and property correctly.
In general, distributions of money and property are given only when all of your nonprofit’s obligations have been paid off. When it comes to distributions, the NCA has precise guidelines you must follow. 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 regulations, such as those in your articles of incorporation, bylaws, or distribution plan, may also apply. If you have any concerns, you should speak with a lawyer.
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, resolution to dissolve, and, if applicable, plan of dissolution. When completing Form 990 or Form 990-EZ, you’ll need to tick the “Terminated” box in the header section on Page 1 of the return