The main steps you need to take under Wisconsin law, to dissolve and wind up a 501(c)(3) nonprofit corporation in Wisconsin.
Wisconsin nonprofit corporations are one type of Wisconsin nonstock corporation. A nonstock corporation, unlike a typical for-profit corporation, does not issue any capital stock. The laws for dissolving nonprofit corporations are part of Wisconsin's more general nonstock corporation law.
Closing starts with dissolution, and to dissolve your nonprofit, you will need a resolution to dissolve. The resolution should include a plan of dissolution that indicates how the nonprofit's remaining assets will be distributed. With the resolution and plan in hand, Wisconsin law provides for voluntary dissolution as follows:
Under the first method, generally the board first adopts the resolution to dissolve, including a plan of dissolution, and then submits it to the members. The members then meet and vote to approve the resolution and plan. Alternatively, members can provide written consent for the dissolution.
Under the second method, it is up to the board alone to approve the resolution and plan. The default rule is that the resolution and plan must be approved by a majority of the directors in office at the time of approval.
Make sure to properly record the resolution to dissolve, the plan of dissolution, 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.
Articles of Dissolution
After your nonprofit has approved dissolution, you'll need to file articles of dissolution with the Division of Corporate and Consumer Services of the Department of Financial Institutions (DFI). The articles of dissolution must contain:
A blank form for the articles of dissolution (Form 110) is available for download from the DFI website. There is a $10 filing fee.
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, including requirements contained in your plan of dissolution, 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, 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 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 DFI website.
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. Depending on circumstances, new actions could be started as long as two years after dissolution.
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.
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.