How to Dissolve a Nonprofit

Step 1: Get Board (and Member) Approval

Dissolution starts with the board of directors adopting a resolution to dissolve. If the nonprofit has voting members, separate from the board, most state nonprofit statutes also require member approval, typically by the vote threshold set in the bylaws or state law. Document both approvals in your minutes, since the state dissolution filing and your final IRS return will both reference this authorization.

Step 2: Review Your Articles' Dissolution Clause

A 501(c)(3) organization's Articles of Incorporation are required to include a dissolution clause specifying that, upon dissolution, remaining assets after paying debts will go to another organization exempt under Section 501(c)(3), or to a federal, state or local government for a public purpose. This clause isn't optional language; it's part of what qualified the organization for tax-exempt status in the first place, and it governs exactly who can receive the nonprofit's remaining assets when it winds down.

Step 3: Wind Up the Nonprofit's Affairs

Winding up a nonprofit follows the same basic sequence as any entity: notify known creditors, pay outstanding debts and obligations to the extent assets allow, collect any money owed to the organization, and then distribute what remains according to the articles' dissolution clause, not to directors, officers or members. Cancel leases, licenses and contracts the nonprofit no longer needs as part of this process.

Step 4: Check Whether Your State's Attorney General Is Involved

Because nonprofit assets are generally treated as held for public benefit rather than for private owners, many states require the nonprofit to notify the Attorney General's charity oversight office, and in some states get its approval, before or during dissolution. This is a separate step from the Secretary of State filing that formally ends the entity's legal existence, and skipping it, where your state requires it, can hold up the dissolution.

Step 5: File Your Dissolution Document With the State

Every state has its own form to end a nonprofit corporation's existence, commonly called Articles of Dissolution or a Certificate of Dissolution, filed with the Secretary of State or equivalent office alongside the applicable fee. Some states require proof of the Attorney General notice or approval, and proof of tax clearance from the state's revenue agency, as attachments to this filing.

Step 6: File a Final Form 990 With Schedule N

Report the dissolution to the IRS by filing a final Form 990, 990-EZ or 990-PF, checking the "final return/terminated" box, answering yes to the question about whether the organization liquidated, terminated or dissolved, and attaching Schedule N, which asks for a description of the assets distributed, their fair market value, the date of distribution, and who received them. Attach a certified copy of your articles of dissolution and the board's resolution or plan of liquidation to the final return. File by the 15th day of the 5th month after the organization terminates.

Step 7: Close Out Employment and Contractor Tax Filings

If the nonprofit had employees, file a final Form 941 or 944 and a final Form 940, and issue final W-2s. If it paid any independent contractor $600 or more during its last year, issue Form 1099-NEC and the accompanying Form 1096. The IRS states it cannot treat a business account as closed until required returns are filed and any tax owed is paid.

Step 8: Withdraw Charitable Solicitation Registrations

If the nonprofit registered to solicit donations in its home state or others, notify each state's charity regulator that it's dissolving and follow that state's specific process for withdrawing the registration, rather than letting it simply lapse. See our guide on charitable solicitation registration requirements for how that registration works.

Step 9: Cancel the EIN

Once the final return is filed and any balance is paid, send a letter to the IRS with the organization's legal name, EIN, address and reason for closing, to close the account associated with the EIN, the same process any business uses.

Private Inurement Is the Rule That Shapes Everything Here

The requirement that remaining assets go to another tax-exempt organization, not to insiders, comes directly from the rule against private inurement that's central to 501(c)(3) status. A distribution that benefits a director, officer or member personally can jeopardize the organization's tax-exempt history, not just the dissolution itself, so this is one of the more consequential steps to get right.

Restricted Grants and Donor Intent Can Limit Your Options

If the nonprofit holds grant funds or donations given for a specific restricted purpose, those restrictions generally follow the money even through dissolution, which can limit which successor organization can receive them or require returning unspent funds to the grantor. Review any restricted gift agreements before finalizing where assets go.

Don't Assume Every State Treats This the Same Way

Whether your state requires Attorney General notice, approval, or neither, and what documentation it wants attached to the Secretary of State filing, varies significantly. Check your specific state's nonprofit statute and Attorney General charity office before assuming the process mirrors a for-profit corporation's dissolution.

This Is Not Legal or Tax Advice

Dissolving a nonprofit involves state nonprofit law, the specific wording of your articles and any restricted gift agreements, and federal tax-exempt organization rules that are easy to get wrong without experience in this area. Talk to a nonprofit attorney about the asset-distribution and state-approval steps, and a tax professional about the final Form 990 and Schedule N.