How to Close Out a Nonprofit Corporation in Texas
The Texas Business Organizations Code (BOC) governs the dissolution of nonprofit organizations in the state and provides the secretary of state's office with the authority to accept filings to close out operations. The secretary of state maintains a website with complete instructions, a fill-in-the-blank template and an electronic filing system that makes closing out a nonprofit a simple process.
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Instructions
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Establish the reason or event that triggered the need to close out the nonprofit, also called a wind up. The Texas Business Organizations Code (BOC) requires that a nonprofit have an actual reason to cease operations. You must document this reason and provide it to the state. The BOC recognizes five events that require the winding up of a nonprofit: the expiration of its duration of existence as stated in the articles of incorporation; a voluntary decision to wind up the affairs of the nonprofit by a vote of the board of directors; the occurrence of an event provided for in the bylaws that requires the winding up of the nonprofit; the occurrence of an event specified in the BOC as requiring the winding up of the nonprofit, such as being insolvent; and a judicial decree that requires the winding up or dissolution of the nonprofit.
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Navigate to the "Corporations" section of the Texas secretary of state website. Click on the "Nonprofit Organizations" link on the side menu and follow the "SOS Forms for Nonprofit Corporations and Unincorporated Nonprofit Associations" link. Enter the section labeled "Business and Nonprofit Forms." The section of the website contains downloadable fill-in-the-blank forms for administering nonprofit organizations.
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Download a certificate of termination. Scroll down the page to the section titled "Termination of a Domestic Entity." Download form 652, "Certificate of Termination - Nonprofit Corporation or Cooperative Association." This form is a template that you can fill in according to the accompanying instructions and filed by mail. Alternatively, you can complete the form online through the state's "SOSDirect" electronic filing service. There is a link on the page to complete the form within the online system.
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Fill out the certificate of termination. Texas law requires the name and address of the nonprofit; the name and address of each director of the board and the nonprofit's officers; the nature of the event that requires the nonprofit to close down; a statement that the nonprofit has complied with the provisions of the BOC governing its winding up; a statement that any property of the nonprofit has been transferred to another eligible nonprofit entity; and a statement that there is no lawsuits pending. The document must be signed by a person who has explicit authority to dissolve the nonprofit (for example, by resolution of the board). Misrepresenting anything in the document or the authority to dissolve the nonprofit is a class A misdemeanor.
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File the certificate of termination with the state. You can file the certificate in duplicate by mail or through the electronic filing system. The certificate can specify that the dissolution should take effect immediately upon acceptance by the state or as a delay of up to 90 days. As of 2010, there is a $5 fee to file the certificate of termination.
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Tips & Warnings
If you don't officially dissolve the nonprofit, it will continue to incur filing obligations on the state and federal level and will leave its executives and board of directors open to liability.
There are many other important steps a nonprofit must take to wind up its affairs that go beyond the state filing obligation. Check with the Internal Revenue Service regarding the nonprofit's tax exempt status and the filing of the last Form 990.
Using the certificate of termination form provided by the state is not a substitute for legal advice. The form merely requests the statutory minimum information that is needed for a valid certificate of termination. If your nonprofit has extensive assets or significant outstanding obligations, it is important to seek expert advice.
