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Here is a summary of the primary actions you will need to do to shut down your nonprofit company in New Jersey. This article solely addresses the most fundamental kind of voluntary dissolution of an existing New Jersey 501(c)(3) nonprofit company. Other forms of nonprofits have distinct regulations and processes, as do other circumstances such as forced dissolution.
The Nonprofit Corporation Act (“NCA”) of New Jersey allows for voluntary dissolution through:
Members’ unanimous written assent action by the board and a vote by the members; or if there are no members, a vote by the board.
If your organization has no members, the board must authorize dissolution in a board meeting. Dissolution must be approved by at least two-thirds of the trustees. The trustees must sign a certificate of dissolution and create a dissolution plan.
If your organization has members, it may be dissolved with the written approval of all members. All members must sign a dissolution certificate and agree on a dissolution plan. A nonprofit with members may also be dissolved by action taken by the board and then by the members. The board must first pass a resolution to dissolve and a plan of dissolution before putting it to a vote of the members. A two-thirds majority of members is necessary by default to approve dissolution; however, your charter of incorporation or bylaws may demand a larger or smaller majority for approval.
The NCA also provides for the possibility that your certificate of incorporation has its own dissolution clauses. Check your certificate of incorporation for dissolution clauses.
Record any board resolutions, the plan of dissolution, the trustees’ votes, and, if required, the members’ votes. This information will be required for filings with the state and the IRS.
You must establish a plan of dissolution regardless of the procedure you employ to authorize dissolution. In accordance with its tax-exempt status, the plan must specify how the organization will discharge its responsibilities and distribute any residual assets. You include the plan in your certificate of dissolution, which you will submit to the Treasury Department’s Division of Revenue (“DOR”). You may wish to hire an attorney to help you create the breakup plan.
You must submit a certificate of dissolution with the DOR once your board or members have authorized the dissolution. The certificate must have the following information:
On its website, the DOR provides one blank certificate of dissolution form (Form C-159B). This form, however, may not include all of the information necessary by the DOR for your specific dissolution. You should seek clarification from the DOR and, if required, have a lawyer create your certificate of dissolution.
The certificate of dissolution, together with your plan of dissolution, must be filed in triplicate. The application cost is $75. The DOR will send a copy of your dissolution certificate to the Attorney General.
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. It may be necessary to appoint one or more officers or directors to manage these issues.
In general, you may distribute money and property only after you have paid off all of your nonprofit’s obligations. The NCA has particular guidelines for distributions that 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.
Giving notice to creditors and other claims is another aspect of winding up your dissolved charity. Giving notice is optional under the NCA and consists of printing a notice in a newspaper once per week for three consecutive weeks, as well as sending a copy of the notice to each known creditor. There are standards governing what must be included in the notice, how and when it must be sent, and how to handle claims that may be made in response to the notice. Some of these rules might be difficult to grasp. As a result, when it comes to providing notice, you should definitely consider seeking the advice of a business attorney.
Dissolution by itself does not:
On the DOR website, you may discover further information including as forms, postal addresses, phone numbers, and filing costs.
Dissolving and winding up your nonprofit company is simply one part of the closure process.
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