Learn how to dissolve a nonprofit company in your state.
Do you need to dissolve your Indiana nonprofit corporation? Here’s a short rundown of the essential processes involved in dissolving and winding up a 501(c)(3) nonprofit company in Indiana.
Table of Contents
Dissolution Authorization
Closing begins with dissolution, and you will require a proposal to dissolve to do so. With the proposal in hand, Indiana 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 accept the plan before submitting it to the members. Members then gather and vote to ratify the dissolution. Members may also authorize dissolution by written approval without meeting.
The board alone must authorize the dissolution under the second procedure. A majority vote of the directors in office at the time of the vote is usually required for approval. When a nonprofit has no voting members and dissolution is exclusively dependent on a vote of the directors, Indiana’s nonprofit statute seems to require the organization to settle all obligations before filing articles of dissolution. If you have a nonprofit with no members and outstanding bills, you should seek the advice of an attorney.
Make careful to correctly document the request to dissolve, 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 board (and, if relevant, voting members) have authorized the dissolution (SOS). The articles of dissolution must include the following:
the name of your NGO and the date of dissolution
a statement that dissolution was approved by a sufficient vote of the board of directors if approval by members was not required, a statement to that effect and a statement that dissolution was approved by a sufficient vote of the board of directors if approval by members was required, (a) the designation, number of memberships outstanding, number of votes entitled to be cast by each class, and number of votes of each class indisputably voting on dissolution, (b) the designation, number of votes entitled to be cast
The SOS website has a blank form for the articles of dissolution (State Form 39080) that may be downloaded. (If your organization does not have members and was dissolved by a vote of the directors, you may need to utilize State Form 35228—consult the SOS or an attorney for further information.) There is a filing fee of $30.
Notifications to State Agencies
After your articles of dissolution are approved, you must submit a “notice of voluntary dissolution” with three state agencies: the Department of Revenue (DOR), the Attorney General’s Unclaimed Property Section, and the Indiana Department of Workforce Development. Form IT-966, which is accessible on the DOR website, should be used for the DOR. For further information on the other two agencies’ notification requirements, you should contact them directly. The SOS’s articles of dissolution provide contact information for all three entities.
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 an attorney.
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. A completed Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets), as well as copies of your articles of dissolution and proposal to dissolve, 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
On the SOS and DOR websites, you may discover further information like as forms, directions, filing fees, postal addresses, phone numbers, and other contact information.
Be careful that dissolving your organization will not put an end to any litigation initiated by or against it prior to dissolution. Furthermore, fresh legal proceedings may be available for at least 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
Non-typical NGOs are dissolved with adequate prior notice of member and director meetings.
the needed number of member or director votes to approve dissolution; the methods to approve dissolution in writing without a meeting; what has to be included in notifications to creditors and claimants; 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.
