How to Dissolve a 501(c)(3) Nonprofit Organization

The day had finally come, and it is now time to wind down your nonprofit. The decision to dissolve a nonprofit organization is often a challenging and emotional process for all involved. The reason could be one of many possibilities: financial difficulties, lack of participation, or maybe your nonprofit fulfilled the mission it was created for. The last one doesn’t happen very often, but it’s possible. Or, as we all found out a few years ago, something like a pandemic can wreck your plans in a hurry.
Whatever the reason, if shutting down your nonprofit is the only real choice you’re left with, it’s crucial to approach dissolution with a clear understand of the legal requirements and best practices to ensure a smooth process. So that’s today’s topic, how to dissolve a nonprofit organization.
📚 ADDITIONAL RESOURCES:
•VIDEO: Nonprofit Bylaws - The Dos and Don'ts • Nonprofit Bylaws - The...
•VIDEO: What Is A 501(c)(7) Nonprofit Organization? • What Is A 501(c)(7) No...
•VIDEO: What Records Should a Nonprofit Keep? • What Records Should a ...
•VIDEO: What Can You Do With a 501(c)(3)? Understanding IRS Charitable Purposes • What Can You Do With a...
•VIDEO: The Fiduciary Duty of Nonprofit Board Members • The Fiduciary Duty of ...
🏆 YOUR NEXT STEP:
•Fill out this form for a FREE consultation on how to start a nonprofit: bit.ly/3Tu9nYE
•Register for Fundraising TV: www.501c3.org/fundraising-tv/
•Download the FREE eBook “10 Things You Need to Know Before Starting a Nonprofit” bit.ly/3XhFag0
0:00 Introduction
2:11 Step 1: Board Decision and Member Approval
3:06 Step 2: Filing a Notice of Intent to Dissolve
3:37 Step 3: Settling Debts and Obligations
4:17 Step 4: Distributing Remaining Assets
5:34 Step 5: Final Federal and State Filings
6:23 Tip #1: Early Planning
6:32 Tip #2: Transparency
6:47 Tip #3: Legal and Financial Consultation
6:58 Tip #4: Document Everything
7:17 Concern #1: Asset Distribution
7:28 Concern #2: Creditor Notifications
7:36 Concern #3: Employee Rights
7:49 Concern #4: Forgetting to mark “Final Return”
8:02 Risk #1: Legal and Financial Liability
8:32 Risk #2: Reputation Damage
8:45 Conclusion

[@FoundationGroup]

If you need help filing for IRS 501(c)(3) status, we’d love to help. Fill out the form at bit.ly/3i6rFxz or give us a call at 888-361-9445.

[@JacobRamolo]

Very interesting

[@cjmor6590]

Would the best strategic risk practice for non-profit dissolution be to transfer the charity to a state with the least compliance

[@Diablobuster]

What if you want to take your nonprofit to be a for profit company? What do you have to do with the nonprofit's assets?

[@FoundationGroup]

This is more of a rabbit hole question than you might imagine. Legally, if a nonprofit becomes a for-profit, all of its assets should be distributed for charitable purposes because of the permanent dedication of assets principle. In practice, you virtually never see this. Thousands of charities lose their 501c3 status every year, usually for repeated failure to file Form 990. Those nonprofits become for-profits as of the effective date of their 501c3 revocation and none of them are called on, at least not by the IRS. At the state level, it's far more complicated. The organization is still a nonprofit corporation...and their articles of incorporation still contain the requirement for distribution at dissolution. If the organization never dissolves, then it's not an issue. But if it does dissolve without restoring 501c3 status, state law still dictates that the assets must be distributed and not taken over by the leaders of this entity.

[@druidindigo5076]

How much of the board can be a working board that also works as staff? In a public 501c3

[@FoundationGroup]

Answered in another thread.

[@cr34t0red7]

hello can an artists become a non profit if they offer workshops? is there a category for that?

[@waynecmontgomery]

If it's educational yes.

[@FoundationGroup]

What Wayne said!