Learn how to dissolve a nonprofit company in your state.
The primary actions required under West Virginia law to dissolve and wind up a 501(c)(3) nonprofit company.
Table of Contents
Dissolution Authorization
Closing begins with dissolution, and you will need a determination to dissolve to do so. You’ll also need a distribution plan, which outlines how the nonprofit’s leftover assets will be allocated once all creditors have been paid. With a resolution and a strategy in place, West Virginia 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 board must first approve the resolution to dissolve and then present it to the members under the first approach. Members then gather and vote to adopt the resolution. Members may also grant unanimous written approval for the resolution. The process for approving a different distribution plan is roughly the same.
The board must adopt the resolution to dissolve under the second approach. A majority of the directors must typically approve the resolution. The method for approving a distribution plan is the same.
Make careful to accurately document the decision 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.
Dissolution Articles
You must submit articles of dissolution with the Secretary of State once your nonprofit has authorized dissolution (SOS). The articles of dissolution must include the following:
the name of your nonprofit, the date dissolution was granted, and, if dissolution was approved by the members, a declaration stating the motion to dissolve was lawfully approved by the members in accordance with the West Virginia Charity Corporation Act and your nonprofit’s articles of organization.
The SOS website has a blank form for the articles of dissolution (Form CD-6) that may be downloaded. There is a filing cost of $25.
The SOS will obtain approvals from the West Virginia State Tax Department, the Employer Coverage Unit (Workers Compensation), and the Department of Employment Security before clearing your file and providing a certificate of dissolution. Processing of your articles of dissolution will be delayed if you are not current on all of your tax liabilities. According to the SOS, depending on the facts, the delay might be significant—up to two years.
“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 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 criteria, such as those outlined in your distribution strategy, may also apply. If you have any concerns, you should speak with a lawyer.
Clearance of Taxes
Your organization cannot make final asset distributions unless it receives updated statements from the State Tax Department and the Department of Employment Security indicating that all due state taxes have been paid. When you file your articles of dissolution, the SOS wants certain statements.
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 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
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, even after dissolution, additional legal actions might be brought by or against your organization for claims or obligation accrued before to dissolution. (The period following dissolution during which fresh proceedings may be initiated might last up to five years.)
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 adequate advance notice of member or director meetings obtaining the necessary number of member or director votes to authorize dissolution
processing of tax clearances precise processes to authorize 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.