Within the life cycle of a nonprofit, it sometimes becomes necessary to dissolve it and/or effectively end its existence via a merger with another nonprofit. When this happens, the IRS requires that the nonprofit's board follow specific steps in order to properly dissolve a nonprofit corporation.
Dissolving a Nonprofit Corporation
Take an official vote to dissolve the company. The initial vote is usually made by the Board of Directors. If the nonprofit has voting members, present the dissolution to them for voting after the Board of Directors has voted. If the nonprofit does not have voting members, the Board of Directors may proceed to wrap up the nonprofit's affairs.
Determine which version of Form 990 to file with the IRS. The Form 990 comes in three separate versions: the 990, 990-EZ and the e-Postcard, 990-N. Which version your nonprofit will file depends on the amount of its assets and gross receipts. For fiscal year 2009, the IRS's gross receipt requirements for the Form 990 were as follows:
- For gross receipts less than or equal to $25,000, use the e-Postcard (990-N)
- For gross receipts less than $500,000 and total assets less than $1.25 million, you may choose either the 990-EZ or 990
- For gross receipts of $500,000 or more and total assets of $1.25 million or more, file Form 990
If you are dissolving a nonprofit after fiscal year 2009, check the IRS web site to determine the current amounts.
Fill out the version of Form 990 applicable to your business. Check the "Termination" box, located in the header on page 1 of the form. Answer "yes" to the questions whether the organization terminated, liquidated, dissolved or distributed net assets. If you expect to have a successor or transferee, put their name in the appropriate space and provide an explanation of the circumstances.
Attach required documentation. Along with Form 990, you must provide the IRS with a certified copy of your articles of dissolution or merger and a copy of any resolutions and plans to liquidate or merge. Form 990, Schedule N also requires certain documents, depending on the specifics of your nonprofit and its dissolution. Schedule N is available on the IRS web site.
Contact your state's Attorney General to determine whether additional filings are required in your nonprofit's state of incorporation. Often, states also require copies of your articles of dissolution and/or your final Form 990.
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