Need to close down your California nonprofit corporation? You'll need to follow California's dissolution laws for nonprofits. While a nonprofit can be involuntarily or administratively dissolved, we'll focus on voluntary dissolution. California recognizes three kinds of nonprofits. Most California nonprofits fall under the category of a nonprofit public benefit corporation—an eligible 501(c)(3) nonprofit corporation.
Here's a quick overview of the main steps to dissolve and wind up a nonprofit public benefit corporation under California law.
To start closing your nonprofit, you'll need a resolution to wind up and dissolve. With the resolution in hand, California law provides for voluntary dissolution in one of three ways:
(Cal. Corp. Code § 6610 (2024).)
Under the first method, a majority of all the nonprofit's members must give their approval through a vote or written ballot.
Under the second method, the board generally will approve the resolution and then submit it to the members. The members then meet and vote to approve the dissolution.
Under the third method, the board alone approves the dissolution. Depending on the circumstances, this process could involve unanimous consent or a majority vote.
Make sure to properly record the resolution to wind up and dissolve, the directors' votes, and, where necessary, the members' votes or ballots. You'll need this information for filings with the state and the IRS.
After your nonprofit has formally decided to wind up and dissolve, you must "forthwith" file a Certificate of Election to Wind Up and Dissolve with both the Secretary of State (SOS) and the Attorney General (AG). The certificate must contain:
(Cal. Corp. Code § 6611 (2024).)
You can file your certificate online through the SOS's bizfile Online system. If you incorporated your nonprofit corporation through the bizfile Online system, then you should already have an account for your nonprofit.
You can also file your certificate by mail. The SOS provides a nonprofit dissolution packet that you can download and fill out that includes:
Make sure you include your cover sheet along with your certificate of election filing.
As of 2024, there's no fee to file a Certificate of Election to Wind Up and Dissolve.
Some nonprofit corporations aren't required to submit Form ELEC NP to the SOS and AG. If your election to dissolve is made by a unanimous vote of your members, or by a unanimous vote of your board if you have no members, then you don't need to file the Certificate of Election to Wind Up and Dissolve. But you'll still need to submit a Certificate of Dissolution (explained later).
After your nonprofit has formally authorized dissolution, it continues to exist only for the purpose of taking care of certain final matters that, collectively, are known as "winding up" the organization. Your nonprofit must stop any activities that aren't necessary to close up the business. Winding up largely involves notifying people about your nonprofit's dissolution, paying off debts, and distributing assets.
As you begin the winding-up process, you'll need to notify parties of your nonprofit's decision to dissolve. Specifically, you must send written notice of the voluntary winding up by mail to the following groups:
(Cal. Corp. Code § 6613 (2024).)
You can deliver notice of your nonprofit's dissolution to the AG's Registry of Charities and Fundraisers in care of the Dissolution Program by mail or in person.
Generally speaking, you can only distribute money and property after you've paid off all of your nonprofit's debts. These debts could include taxes, loan payments, and unpaid rent. While you don't need to receive clearance from the FTB, you still need to make sure your nonprofit has paid all of its taxes and filed its final returns.
After paying off debts, a dissolving 501(c)(3) organization must distribute its remaining assets for tax-exempt purposes. In practice, this task usually means distributing assets to one or more other 501(c)(3) organizations. However, other asset distribution requirements—such as returning loaned items to the lender—might also apply.
At this point, you should decide:
But it's critical that you don't yet distribute these assets. Because your nonprofit was organized for a specific purpose, the AG can object to any distributions your nonprofit makes that are inconsistent with your nonprofit's purpose. So, before you distribute your nonprofit's remaining assets, you must receive a dissolution waiver of objections from the AG (discussed below). (Cal. Corp. Code § 6716 (2024).)
If your nonprofit doesn't have any remaining assets, then you won't need to make plans for its assets. However, you'll still need to obtain a dissolution waiver from the AG.
Regardless of whether your nonprofit has any remaining assets after all its debts are paid, you must request a letter from the AG that "either waives objections to the distribution of the corporation's assets... or confirms that the corporation has no assets." Both public benefit and religious nonprofits must meet this requirement.
You must request the letter by sending the following documents to the AG:
Once you receive your letter, hold on to it. When you submit your Certificate of Dissolution to the SOS, you'll need to include the AG's letter.
After you've completed the winding-up process for your nonprofit, you must file a Certificate of Dissolution with the SOS. A majority of your nonprofit's directors must sign and verify the certificate. The Certificate of Dissolution must include the following information:
As discussed earlier, you must also include a letter from the AG waiving objections to the proposed distribution of your nonprofit's assets or confirming that your nonprofit has no assets to distribute. (Cal. Corp. Code § 6615 (2024).)
You can fill out and submit a dissolution packet by mail or complete the filing online using the SOS's bizfile Online system.
After the SOS approves your filing, they'll send you back a stamped copy of the Certificate of Dissolution.
To complete the closing of your nonprofit, you must mail a final dissolution packet to the AG. The packet should contain:
This is the final step to dissolve your nonprofit with the state. You'll need to take other steps to close your nonprofit out with the IRS.
For federal tax purposes, you must file IRS Form 990 or IRS Form 990-EZ to close out your nonprofit's existence with the federal government. With your final tax form, you must include:
When completing Form 990 or Form 990-EZ, you must check the "Terminated" box in the header area on Page 1 of the return.
For additional guidance, check out Every Nonprofit's Tax Guide, by Stephen Fishman (Nolo), or the instructions on the IRS's termination of an exempt organization webpage. If you have further questions, consider consulting with a tax professional.
In certain limited circumstances, nonprofits might be eligible to dissolve using a streamlined dissolution procedure in California. In general, only nonprofits "created in error" that have existed for 24 months or less can use the Nonprofit Short Form Dissolution Certificate (Form DSF NP).
A majority of the nonprofit's directors—or the incorporator or a majority of incorporators if no directors were elected or listed in the articles of incorporation—must sign and verify the short for dissolution certificate.
The person filing the certificate must be able to state that:
(Cal. Corp. Code § 6610.5 (2024).)
You must file the certificate with the SOS. The SOS will notify the FTB and AG of your nonprofit's dissolution. After filing this form, the state effectively dissolves your nonprofit is effectively dissolved by the state.
Before you start the dissolution process for your nonprofit, you should refer to the dissolution webpage on the AG's website. This page has a summary of the voluntary dissolution process, a list of the relevant laws, and answers to FAQ. You should also check out the AG's General Guide for Dissolving a California Nonprofit Corporation. This guide gives you step-by-step instructions for dissolving your nonprofit, including what documents you need to submit and what agencies to contact.
This article covers only the most basic steps of voluntary dissolution after your nonprofit has started doing business. There are many additional, more specific rules, covering things like:
In addition, your articles of incorporation or bylaws might contain rules that apply instead of, or along with, state law. You're strongly encouraged to consult with a lawyer to obtain additional information on these and other points related to your nonprofit's dissolution and winding up.
Dissolving and winding up your nonprofit corporation is only one piece of the process of closing your organization. For further, general guidance on many of the other steps involved, check out our 20-point checklist to closing your business and our article on what you need to do when closing your business.