Learn how to dissolve a nonprofit company in your state.
The primary actions required by Wisconsin law to dissolve and wind up a 501(c)(3) nonprofit company in Wisconsin.
Nonprofit companies in Wisconsin are one form of Wisconsin nonstock company. In contrast to a traditional for-profit business, a nonstock corporation does not issue capital stock. Nonprofit company dissolution rules are part of Wisconsin’s broader general nonstock corporation legislation.
Dissolution Authorization
Closing begins with dissolution, and you will need a determination to dissolve to do so. The resolution should contain a dissolution plan outlining how the residual assets of the organization will be allocated. With the resolution and strategy in hand, Wisconsin law allows for voluntary dissolution in the following manner:
If your organization has members, a vote or other permission of the members is required; otherwise, a vote of the directors is required.
In the first way, the board normally approves the resolution to dissolve, including a plan of dissolution, before submitting it to the members. The members then gather to vote on the resolution and proposal. Members may also offer written agreement for the dissolution.
The resolution and plan must be approved by the board alone under the second procedure. The resolution and plan must be adopted by a majority of the directors in office at the time of approval, according to the default norm.
Make careful to accurately document the resolution to dissolve, 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.
Dissolution Articles
After your nonprofit has authorized dissolution, you must submit articles of dissolution with the Department of Financial Institutions’ Division of Corporate and Consumer Services (DFI). The articles of dissolution must include the following:
a statement to that effect and a statement that dissolution was approved by a sufficient vote of the board if approval by members was required, a statement that dissolution was approved by a sufficient vote of the members of each class entitled to vote on dissolution if approval of dissolution by a person other than the members or the board is required, a state
The DFI website has a blank form for the articles of dissolution (Form 110) that may be downloaded. There is a filing fee of $10.
“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 obligations, including those in your plan of dissolution, 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. 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 dissolution. 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
On the DFI website, you may discover more 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. Depending on the circumstances, fresh proceedings might be initiated up to two years following the 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:
involuntary dissolution dissolution before to electing a board of directors what particular issues should be included in a plan of dissolution providing sufficient advance notice of member and director meetings requiring the requisite number of member or director votes to support dissolution
What precise components must be included in notifications to creditors; and how to react to legal claims following 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.