Step #10: Dissolving Your Nonprofit
Step #10 runs contrary to the title of the series, “10 Essential Steps to Start a Nonprofit,” but should be reviewed by those who are forming (or thinking about forming) a nonprofit. Dissolving a nonprofit happens for many reasons: it becomes too difficult to raise funds or obtain grants; there are too few resources or revenue streams to offer programs or services; the mission or cause is no longer relevant or has been accomplished; or it has failed to file necessary forms and tax-exempt status has been revoked, leading the board of directors and voting members to vote to dissolve. Whatever the reason, start with these steps (this list is not exhaustive!) to dissolve your Ohio nonprofit.
- Have the board of directors and voting members vote to adopt a “resolution to dissolve.” This resolution provides authority to move forward with the dissolution process. In certain circumstances it is possible for directors alone to authorize dissolution–check to make sure you can proceed this way before starting. Your dissolution should comply with the dissolution terms set forth in your code of regulations/bylaws.
- File a Certificate of Dissolution with the Ohio Secretary of State.
- File a Final Annual Report and Asset Disposition form with the Ohio Attorney General.
- File a tax clearance certificate with the Ohio Department of Taxation showing that all necessary tax obligations have been met.
- If your nonprofit had employees, you will need to notify the Department of Job and Family Services that contributions are either not required, or have been paid.
- On your IRS tax forms 990 or 990EZ, you will need to file a Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) as well as some organizing documents to notify the IRS that your nonprofit has dissolved.
Some nonprofits choose to just let the organization “expire”: the IRS revokes tax-exempt status after three years pass without filing the 990 tax form; the Secretary of State takes control of business records and lists the nonprofit as inactive if filing dates are missed, etc. However, it is recommended (by me, for example) to complete the steps in the dissolution process so that you officially end the nonprofit corporation’s existence. The main benefits of formal dissolution are that you make the organization beyond the reach of claimants and creditors, and you fulfill your obligations under Ohio law of distributing any remaining assets properly (i.e., to a like-minded nonprofit).
If you want to discuss how to dissolve a nonprofit, email me at email@example.com.