Do you want to know how to dissolve your nonprofit company in Arkansas? Here’s a short rundown of the essential processes involved in dissolving and winding up a 501(c)(3) nonprofit company in Arkansas.
Table of Contents
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 nonprofit’s residual assets will be allocated after all creditors have been paid. With the resolution and strategy in hand, Arkansas law allows for voluntary dissolution in the following manner:
If your nonprofit does not have members, a vote of the directors is required; otherwise, action of the directors is required followed by a vote or other permission of the members.
The first way relies only on the board to authorize the dissolution. A majority vote of the directors in office at the time of the vote is usually required for approval.
The board must first adopt the resolution and plan of dissolution before submitting it to the members under the second approach. Members then gather and vote to ratify the dissolution. Members may also authorize dissolution with written approval.
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
You must submit articles of dissolution with the Secretary of State’s Business and Commercial Services division once your board (and, if relevant, voting members) have authorized the dissolution (BCS). The articles of dissolution must include the following:
the name of your nonprofit, the date dissolution was authorized if approval by members was not required, a statement to that effect, and 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) either the total number of votes cast for dissolution or the total number of votes cast for dissolution
The BCS website has a blank form for the articles of dissolution (Form NPD-4) that may be downloaded. There is a filing cost of $50.
Winding Down
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.
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 BCS website, you may discover 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 specific items should be included in a dissolution plan providing proper advance notice of member and director meetings the required number of member or director votes to approve dissolution possible required dissolution approval by people other than directors and members steps to approve dissolution in writing without a meeting
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.