Learn how to dissolve a nonprofit company in your state.
Do you need to dissolve your South Carolina nonprofit corporation? Here’s a short rundown of the essential processes involved in dissolving and winding up a 501(c)(3) nonprofit company in South Carolina.
Table of Contents
Dissolution Authorization
Closing begins with dissolution, and you will require a plan of dissolution to dissolve your organization. After all creditors have been paid, the plan will specify how the nonprofit’s remaining assets will be dispersed. With the plan in hand, South Carolina law allows for voluntary dissolution in the following ways:
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 way requires the board to first approve the plan of dissolution before submitting it to the members. Members then gather and vote to ratify the dissolution. Members may also authorize dissolution with written approval.
The board alone must adopt the plan of dissolution under the second way. A majority of the directors in office at the time of approval must generally approve the plan.
Make careful to correctly document 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.
First Notice to the Attorney General
You must submit articles of dissolution for your nonprofit (see below), but you must also notify the Attorney General of the dissolution on or before that date (AG). A copy or description of your dissolution strategy must be included in the notification. You cannot transfer any of your nonprofit’s assets until 20 days after notifying the AG, or unless the AG signals in writing that it will not take action on the transfer, whichever comes first.
Dissolution Articles
You’ll need to submit articles of dissolution with the Secretary of State once your board (and, if appropriate, voting members) have authorized the dissolution and after or on the same day you’ve filed notice with the AG (SOS). The articles of dissolution must include the following:
a statement that the plan of dissolution was approved by a sufficient vote of the board of directors if approval by members was required, (a) the designation and number of members of, and number of votes entitled to be cast by, each class entitled to vote separately on dissolution; and (b) the total number of votes cast for and against dissolution.
The SOS website has a blank form for the articles of dissolution that may be downloaded.
“Rising Winds”
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’ve 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 conditions for asset distribution 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.
Notice to the Attorney General
After “all or nearly all” of your nonprofit’s assets have been transferred—that is, after you have completed winding up your nonprofit—you must notify the AG of who acquired assets other than creditors. The list must include an address for each asset receiver as well as the assets received.
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), as well as copies of your articles of dissolution and plan of dissolution, must be included. 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 dissolving your organization will not put an end to any litigation initiated by or against it prior to dissolution. Furthermore, for claims or responsibility accrued before to dissolution, fresh legal proceedings may be brought up to two 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
what particular components should be included in a dissolution plan that provides sufficient prior notice of member and/or director meetings
the requisite number of member and/or director votes to approve dissolution is conceivable; dissolution must be approved in writing by individuals other than directors and members; and actions to approve dissolution without a meeting are taken.
What information must be included in notifications to creditors and claimants, as well as how to react to legal claims upon 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.
Dissolving and winding up your nonprofit company is simply one part of the closure process.