Learn how to dissolve a nonprofit company in your state.
Here’s a rundown of the primary procedures you’ll need to do to dissolve a nonprofit company. This article solely addresses the most fundamental kind of voluntary dissolution of an existing Louisiana 501(c)(3) charitable company. Other forms of nonprofits have distinct regulations and processes, as do other circumstances such as forced dissolution.
Caution: Louisiana’s nonprofit company statutes are one-of-a-kind and complicated. You are highly advised to seek the advice of an experienced Louisiana divorce attorney.
Table of Contents
Voluntary Dissolution Types
Under Louisiana law, there are two sorts of voluntary dissolution: “short form” dissolution and “long form” dissolution. Short form dissolution is feasible when a nonprofit has no debt and no immovable property at the time of dissolution. (The most frequent kind of “immovable property” is real estate, which includes land and buildings.) Long form dissolution, on the other hand, occurs when a nonprofit has debt or immovable property at the time of dissolution. While the procedure for your organization to approve dissolution is similar for both types of dissolution, long form dissolution requires significantly more steps.
Dissolution Authorization
Closing begins with dissolution, and you will need a determination to dissolve to do so. After all creditors have been paid, the resolution must state how the nonprofit’s remaining assets will be allocated. With the resolution in hand, Louisiana law allows for voluntary dissolution in the following ways:
If your organization has members, a vote or other permission of the members is required; otherwise, a vote of the incorporators is required.
The first way involves the members meeting and voting to adopt the resolution. (Unlike many other states, Louisiana does not explicitly require action by a nonprofit’s governing body, such as a board of directors, before members vote.) Members may also grant unanimous written agreement for the resolution without meeting.
The incorporators must adopt the resolution to dissolve under the second way. The dissolution must be approved by all of the incorporators. (In contrast to many other states, Louisiana law does not expressly specify that a board of directors of a nonprofit organization without members may sanction dissolution.)
Make careful to accurately document the motion to dissolve, the votes of members, and, if required, the votes of incorporators. This information will be required for filings with the state and the IRS.
Affidavit of Dissolution (Short Form Dissolution)
If you are dealing with a short form dissolution, you will continue immediately to submitting an affidavit to dissolve your company with the Secretary of State once your members have allowed dissolution (SOS). You may get an affidavit form from the SOS website, Form SS339, Affidavit to Dissolve Corporation. The affidavit must be signed in front of a notary public. The filing fee for the affidavit is $75.
The SOS will send you a certificate of dissolution after your file has been finalized. You should submit a copy of this certificate with the Clerk of Court in the county where your nonprofit is registered. (If your charity is in Orleans Parish, you should submit a copy of the certificate with the mortgage recorder.)
Following the filing of the affidavit, the members will be individually accountable for any debts or claims. As a result, before applying for short form dissolution, be sure there are no outstanding obligations or claims. You should check with an attorney to verify that short form dissolution makes sense in your specific situation.
Certificate and Notice (Long Form Dissolution)
For long-form dissolutions, when the members approve the dissolution, they must designate a person (or individuals) to function as the corporation’s liquidator. The liquidator is normally appointed by a majority vote of the members. In general, all of the officers’ and board of directors’ rights, powers, and responsibilities are passed to the liquidator, and the officers’ and directors’ authority and duties terminate when the liquidation is appointed, unless the liquidator chooses differently.
However, the liquidator’s appointment will not be effective unless you complete two tasks:
Publication of a notice of dissolution authorization; and filing with the SOS a certificate of dissolution declaring that the dissolution has been approved in accordance with Section 12:142 of Louisiana’s Nonprofit Corporation Law.
When you file the certificate (also known as an amendment of dissolution) with the SOS, you must include a copy of the notice you issued in a newspaper, as well as an affidavit from the publisher attesting to the publication.
The certificate functions similarly to the affidavit in short form dissolutions. The certificate filing cost is $75. The SOS does not provide a certificate of dissolution form, thus you must create your own.
Please keep in mind that you should seriously consider hiring an attorney to help you prepare both the public notice and the certificate.
Liquidation (Long Form Dissolution) (Long Form Dissolution)
The liquidator may continue with liquidating your company when you have published the notice of dissolution and submitted a certificate of dissolution with the SOS. If the members do not allow liquidation without judicial intervention, a court will appoint a liquidator, and certain liquidation actions may be subject to a distinct set of regulations. This article, however, does not address court-supervised liquidations.
Liquidation might entail a wide range of activities. Much of the procedure, however, may be reduced to paying off any obligations and then distributing any residual assets. In general, the liquidator may only distribute money and property when all of your nonprofit’s obligations have been paid off. Then there are special regulations for 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 may also apply.
Creditors and Other Claimants Should Be Warned (Long Form Dissolution)
Another important aspect of liquidation is notifying creditors and other claimants of your nonprofit’s demise. Giving notice entails (a) giving notice to all known creditors and people considered to have genuine claims against your organization, as well as (b) posting notice in a newspaper.
Certificate of Liquidatorship (Long Form Dissolution)
When the liquidator is finished, he or she must sign a liquidator certificate and submit it to the SOS. There is no charge for submitting the certificate. However, before finalizing the liquidator’s certificate, the SOS will check for certifications from the Louisiana Department of Revenue (DOR) and the Louisiana Workforce Commission (LWC) indicating that no taxes, fees, or other charges are owed.
After the SOS has processed the liquidator’s certificate, it will return a certificate of dissolution. A copy of the dissolution certificate must be submitted with the registrar of mortgages in the parish where your nonprofit’s last registered office was. This is not the same as the certificate of dissolution you would obtain in a short form dissolution, which, as previously stated, should normally be filed with a Clerk of Court.
There is no state-issued form for the liquidator certificate, so you must write your own or have an attorney prepare it to ensure it has all of the essential information.
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 affidavit of dissolution or different certifications, and resolution 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
The SOS website has further information, including as forms, postal addresses, and filing costs.
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
Court-supervised liquidations of non-typical NGOs
what particular topics should be included in a resolution to dissolve providing sufficient prior notice of member meetings the number of member votes necessary to support dissolution
precise procedures for authorizing dissolution in writing without a meeting
What should be included in notifications to creditors; where, how, and when notices to creditors should be published; the rights and obligations of liquidators; 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.
It is highly encouraged that you hire a lawyer to help you close your Louisiana nonprofit company.