How to Dissolve Your Nonprofit Organization
Are you ready to dissolve your California nonprofit organization? If so, it is vital that you follow the correct winding down procedures. Failing to do so may result in fines and other penalties from the IRS.
Most charities in San Diego must follow these steps to cease operations:
Vote to Dissolve the Organization
Before you can close your nonprofit, you must convene a meeting of your board of directors and have them vote on the matter. This vote should be recorded in the minutes of the meeting – in case there are any arguments or disputes about the dissolution plan at a later date.
You may want to have a San Diego nonprofit attorney attend this meeting as a witness to further protect yourself against future disagreements.
File the Necessary Paperwork
Once your board of directors approves your dissolution plan, you will have to file the necessary paperwork with the state and federal governments.
You will need to file the following documents with the California Secretary of State and Attorney General:
- Certificate of Election to Wind Up and Dissolve (Form ELEC NP)
- Certificate of Dissolution (Form DISS NP)
Depending on the size of your organization, you will have to file one of the following documents with the IRS:
- Form 990: For nonprofits with $200,000 or more in gross receipts
- Form 990-EZ: For nonprofits with $200,000 or less in gross receipts
- Form 990-N: For nonprofits with $50,000 or less in gross receipts
If you aren’t quite sure which form you need to file, your California charity lawyer should be able to point you in the right direction.
Pay Off Your Liabilities and Distribute Your Assets
Neither the state of California nor the federal government will approve the dissolution of your organization if you have any outstanding liabilities. You must therefore make a plan for paying off your debts before you can close your doors.
Federal law also requires your nonprofit to transfer its remaining assets to another tax-exempt organization or the government. You may not give any assets to employees, volunteers, board members, or any other individual. You may sell your property to a private party – as long as they pay the fair market value.
How Long Does it Take to Dissolve a California Nonprofit Organization?
The time it takes to wind up a nonprofit organization in California can vary depending on factors like:
- The size of the charity,
- The willingness of the board to dissolve the organization,
- The nature of the nonprofit’s debts, and
- The liquidity of the assets held by the organization
However, for the majority of charities in the Golden State, the dissolution process takes no more than three to four months.
A San Diego Nonprofit Attorney You Can Count On
Do you need an experienced California charity lawyer to walk you through the process of dissolving your organization? Then please don’t hesitate to contact the team at the Semanchik Law Group. You can reach us by filling out our online contact form or giving us a call at (619) 535-1811.