In life and in nonprofits, endings are rarely as fun as beginnings.
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When a nonprofit corporation has exceeded its useful life it needs to be dissolved according to a formal process that terminates both its legal and functional existence.
Nonprofits who lack the desire or expertise to navigate the dissolution process on their own can turn to attorneys or other professionals who will handle the details for them. But since finances are the reason many nonprofits choose to dissolve in the first place, non-functioning nonprofits often carry on in limbo – not active, but not legally dissolved, either.
That's dangerous because until the nonprofit is legally dissolved, the board members and officers still have fiduciary and legal responsibility for the organization. Regardless of whether or not you hire an attorney or do it yourself, it's important to formally dissolve the nonprofit – and here's the general process for doing it:
- Board Approval. The decision to dissolve a nonprofit corporation is achieved at the board level. A majority of board members must approve the decision to proceed with a legal dissolution before the formal process can be initiated.
- Final Return & Status Verification. Next, the nonprofit corporation must file its final 990 (or 990 EZ) and fulfill other requirements to verify its current status with the state. Each state has its own dissolution rules, so you'll need to check with your state for details about the requirements that should be completed at this stage of the game.
- Obtain Approval from the State. The nonprofit will likely have assets that need to be disposed of in accordance with the dissolution clause in the organization's bylaws. But before that happens, you will have to obtain permission from the state to formally dissolve, usually by completing a few forms and paying a small fee.
- Submit Final Documents. After the nonprofit has been dissolved, the last step involves following up with the submission of final documents to the Secretary of State and/or Attorney General's offices in your state. Again, check with your state to verify the final filing requirements in your area.