Here is an overview of the main steps to dissolve and wind up a 501(c)(3) nonprofit organization in New Hampshire. There may be different rules or procedures for other types of nonprofits, or for other situations such as an involuntary dissolution.
New Hampshire’s Voluntary Corporations and Associations law (“VCA law”) provides for voluntary dissolution through either:
If your nonprofit has voting members, the VCA law states simply that dissolution requires a two-thirds vote of the membership or voting stock. However, more tasks may be involved. For example, your board may first need to approve a resolution to dissolve the corporation and then submit it to the members, or you may need to give advance notice to your members before a vote is taken. You should check your articles of agreement and bylaws for any special rules for authorizing dissolution.
If your nonprofit does not have members or stockholders, the VCA law simply states that it is up to the board of directors to approve dissolution. You should check your articles of agreement and bylaws for additional rules and requirements regarding the board approval process. You probably will need to adopt a resolution to dissolve, and you may find that dissolution must be approved by, for example, a majority of the directors in office at the time of approval.
Regardless of whether your nonprofit has members, as part of approving dissolution you will also need to adopt a plan of dissolution. The plan shows how your nonprofit will pay its creditors and to whom its remaining assets will be distributed.
Make sure to properly record the board’s resolution, plan of dissolution, the directors’ votes, and, where necessary, the members’ votes. You’ll need this information for filings with the state and the IRS.
Statement of Dissolution
After your board (and, where applicable, voting members) have approved the dissolution, you’ll need to file a statement of dissolution, including your plan of distribution, with the Corporation Division of the Department of State (“DOS”).
The statement of dissolution will include:
A blank form for the statement of dissolution is available for download from the DOS website. There is no fee to file the statement.
Unlike most other states, New Hampshire’s law for nonprofits does not specify any other tasks that may be involved with closing down your organization. These tasks, known as “winding up” the company, usually involve such things as collecting all available assets, paying creditors, and then properly distributing any remaining assets. (In some states, it also involves giving notice of the dissolution to creditors and other claimants.)
Generally speaking, distributions of assets are made only after you have paid off all of your nonprofit’s liabilities and obligations. If your nonprofit had certain items that were conditionally on loan to it, those items must be returned to whoever loaned them, according to the terms of the loan. Be aware that a dissolving 501(c)(3) organization must distribute its remaining assets for tax-exempt purposes. In practice, this generally means distributing those assets to one or more other 501(c)(3) organizations. If you have any questions about how to distribute assets upon dissolution, you should check with a lawyer.
Federal Tax Note
For federal tax purposes, you’ll need to file IRS Form 990 or IRS Form 990-EZ. You must include a completed Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets), as well as copies of your articles of dissolution, resolution to dissolve, and plan of dissolution. When completing Form 990 or Form 990-EZ, you’ll need to check the “Terminated” box in the header area on Page 1 of the return. For additional, more specific guidance, check out Every Nonprofit’s Tax Guide, by Stephen Fishman (Nolo), go to the IRS website, or consult with a tax professional.
You can find additional information, such as forms, mailing addresses, phone numbers, and filing fees, on the DOS website.
Because New Hampshire’s VCA law is relatively brief and undetailed, you are strongly urged to seek additional guidance on the dissolution process from an attorney.
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 Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.