How to Dissolve an Ohio Nonprofit Corporation

Learn how to dissolve a nonprofit company in your state.

Nonprofits may shut because they are no longer able to get required financing, trustees or members have irreconcilable disputes, or the organization simply decides that it has achieved its objectives and no longer needs to exist. Whatever the underlying cause, you will need to shut down your Ohio nonprofit company via a procedure known as dissolution. A vote or other official authorisation, the submission of important paperwork with government authorities, and a number of additional actions known as winding up the company are all required for dissolution.

The particular methods for shutting an Ohio charity will differ based on a few key factors. Keeping this in mind, the following limitations apply to this article:

It only applies to non-profit organizations (not all nonprofits are incorporated)
It only applies to NGOs that have applied to and been authorized by the IRS as 501(c)(3) tax-exempt organizations.
It only applies to voluntary dissolutions by the nonprofit’s members (a nonprofit may be involuntarily dissolved by a court order or, in exceptional circumstances, solely by action of the nonprofit’s directors); and it does not apply to court-supervised voluntary dissolutions (at a certain point during a voluntary dissolution, various people can ask a court to step in and supervise matters, including appointing a receiver to manage the dissolution process).

Advantages of Formal Dissolution

The State of Ohio has recognized your nonprofit company. You will formally cancel that registration and cease the corporation’s existence via the dissolution procedure. A well managed dissolution accomplishes at least two essential objectives for a nonprofit that is winding down. For starters, it puts your company beyond of reach of creditors and other claims. Second, it enables you to meet your legal requirements for the correct disposition of any surviving corporate assets.

Certain things are unaffected by dissolution.

It should be noted that dissolution does not normally prevent ongoing legal actions, litigation, or hearings by or against your organization.
Dissolution Authorization

Your nonprofit’s voting members must allow dissolution under Ohio’s Nonprofit Corporation Law (“NCL”) by voting to adopt a resolution to dissolve. In many jurisdictions, a vote of the nonprofit’s directors may sanction dissolution. However, under Ohio law, directors acting alone may only sanction dissolution in exceptional situations, such as bankruptcy, when all assets have been sold in a judicial sale, or with the authorization of a state court. The member vote must normally take place at a member meeting, and members must be notified in advance of the meeting. Dissolution requires a majority vote of the members by default; however, your articles of incorporation or other laws may provide for approval by a different number or proportion of members.

Make careful to accurately document the resolution to disband as well as the votes of the members. This information will be required for filings with the state and the IRS.

Certificate of Divorce (Form 560)

You must submit a certificate of dissolution with the Secretary of State after dissolving your nonprofit (“SOS”). You must provide other documentation relevant to taxes and other concerns in addition to the certificate.

The certificate of dissolution must include the following information:

the name of your organization a declaration that a resolution of dissolution has been approved a statement of how such resolution was adopted (“by the Members in accordance with Ohio Revised Code § 1702.47(D)”)
the location in Ohio of your nonprofit’s primary office; the names and addresses of your nonprofit’s directors and officers; the name and address of your nonprofit’s statutory agent; and the date of dissolution, if different from the filing date (the date of dissolution cannot be more than 90 days after the filing of the certificate of dissolution).

An authorized official signs the certificate. Other signing restrictions apply if an authorized official fails to sign and submit the certificate within 30 days after dissolution.

The certificate must be filed for a price of $50. You should fill up the SOS’s certificate of dissolution form. The form is part of a collection of nonprofit dissolution forms and instructions accessible as a single downloadable file on the SOS website—Form 560. Your submission will usually be handled within three to seven business days. Expedited processing options, as specified on Form 560, are available for an extra cost.

Clearances for Taxes and Other Purposes

The State of Ohio requires you to provide extra documents along with your certificate of dissolution, which includes:

a DOT tax clearance certificate demonstrating that the nonprofit has paid all taxes due as of the date of dissolution, or an affidavit stating that the nonprofit is not required to pay or that the DOT has not assessed any such tax (use DOT Form D5 to request a tax clearance certificate); and evidence from the director of Job & Family Services (“JFS”) demonstrating that all contributions due from the nonprofit as an employer have been paid, or that payment has been adequately guarantied

You may be able to submit a single affidavit in lieu of these papers. To use this option, you must (a) notify the DOT and JFS in writing of the effective date of your nonprofit’s dissolution, and (b) state that your nonprofit recognizes the applicability of section 1702.55 of the Ohio Revised Code, which holds nonprofit directors personally liable for illegal distributions of the nonprofit’s assets. As part of the Form 560 bundle, an affidavit form is supplied.

“Rising Winds”

Following your members’ approval of dissolution, your corporation continues to exist simply to handle some last tasks known collectively as “winding up” the business. According to the NCL, the directors “must move as quickly as is reasonable” to wound up the company. The NCL has a lengthy list of possible winding-up activities; nevertheless, in summary, winding up is primarily concerned with repaying any obligations and then distributing any residual assets (though there may also be other tasks involved). It may be necessary to appoint one or more officers or directors to manage these issues.

In general, you may distribute money and property only after you have paid off all of your nonprofit’s obligations. The NCA has particular guidelines for distributions that you must follow. 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 regulations, such as those in your articles of incorporation, bylaws, or distribution plan, may also apply. If you have any concerns, you should speak with a lawyer.

Creditors and Other Claimants Should Be Warned

You must notify creditors and other claimants of your nonprofit’s dissolution. There are two types of notification obligations under the NCL. To begin, you must provide notice to each known creditor who has a claim. Second, you must print the same notice at least once a week for two weeks in a general circulation newspaper in the county where your nonprofit’s main office is situated.

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

Check the SOS and DOT websites for forms, instructions, postal addresses, phone and fax numbers, filing costs, and other comparable information.

Finally, dissolving and winding up your nonprofit company is simply one part of the closure process.