Need to close down your Washington D.C. nonprofit corporation? Here’s an overview of the main steps you'll need to take. This article only covers the most basic kind of voluntary dissolution of a typical Washington D.C. 501(c)(3) nonprofit corporation that’s already doing business. There are different rules and procedures for other types of nonprofits, and for other situations such as an involuntary dissolution.
Closing starts with dissolution, and to dissolve your nonprofit, you will need a proposal to dissolve. With the proposal, D.C. law provides for voluntary dissolution as follows:
Under the first method, it is up to the board alone to approve the proposal to dissolve. Typically, the proposal must be approved by a majority of the directors.
Under the second method, the board first must adopt the proposal to dissolve and then submit it to the members. The members then generally meet and vote to approve the proposal, including the plan of dissolution. Alternatively, members can give their approval through unanimous written consent.
Make sure to properly record the proposal to dissolve, the directors’ votes, and, where necessary, the members’ votes or written consents. You’ll need this information for filings with the state and the IRS.
Notice to Attorney General
Before filing your articles of dissolution, you must send notice to the Attorney General (AG). The notice must state your nonprofit’s name and charitable purpose, how dissolution was authorized, the reason for the dissolution, the nature and dollar value of the organization’s assets, and the proposed disposition of any significant assets. Send the notice to: Section Chief, Public Advocacy Section, Office of the Attorney General, 441 Fourth Street, N.W., Suite 600-S, Washington, DC 20001.
Articles of Dissolution
After your nonprofit has approved dissolution and you’ve given the AG notice, you’ll need to file articles of dissolution with the Corporations Division of the Department of Consumer and Regulatory Affairs (DCRA). The articles of dissolution must contain:
A blank form for the articles of dissolution (Form DNP-6) is available for download from the DCRA website.
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 company. Winding up is largely about paying off any debts and then distributing any remaining assets, but there may also be other tasks involved.
Generally speaking, you can only distribute money and property after you have paid off all of your nonprofit’s debts. Then, for asset distributions, there are specific rules you need to follow. For example, your nonprofit must return any items that were loaned to it on the condition that they would be returned upon dissolution. In addition, after paying off debts and returning loaned assets, a dissolving 501(c)(3) organization must distribute its remaining assets for tax-exempt purposes. In practice, this usually means distributing assets to one or more other 501(c)(3) organizations. Other requirements for distributions may also apply. If you have any questions, you should consult with a lawyer.
Notice to Creditors and Other Claimants
One other part of winding up your dissolved nonprofit involves giving notice to creditors and other claimants. Giving notice is optional. However, doing so will help limit your liability and also allow you to more safely make final distributions of remaining assets. You can mail notice directly to known claimants after dissolution. You can also give notice to unknown claimants by publishing in a newspaper.
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 and proposal to dissolve. 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 guidance, check out Every Nonprofit’s Tax Guide, by Stephen Fishman (Nolo), go to the IRS website, or consult with a tax professional.
Be aware that dissolution will not stop lawsuits started by or against your nonprofit before dissolution. Moreover, after dissolution, new legal actions can still be started by or against your nonprofit for claims or liability incurred prior to dissolution. The length of time after dissolution during which new actions can be started could be as long as three years.
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 may contain rules that apply instead of, or along with, state law. You are strongly encouraged to consult with a lawyer to obtain additional information on these and other points.
Final Note: 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.