Nonprofit Dissolution

Dissolution can be a natural part of a nonprofit’s lifecycle or a forced decision. If your organization aligns with other partners, you might consider a merger as a first step- this toolkit from La Piana is an excellent resource in thinking through mergers. If your organization is considering a dissolution, below are steps to consider. We do recommend working with an attorney throughout the process to protect your board and the organization’s legacy.

General Resources:

• MCA Resources | 35-2-7XX
• Council of Nonprofits Overview + Resources
• Step-by-Step for Montana Dissolution
• Directions from the IRS- StayExempt

Steps to Take:

1. FIRST, remember to consult your own bylaws regarding steps for dissolution by the organization.
2. Depending on whether you do or do not have members, you will have to follow the appropriate steps for notifying and involving membership. Both of these include giving notice of the meeting at which dissolution will be discussed.
   • • Dissolution by Incorporators or Directors
     • Dissolution by Directors, Members, and Third Persons
3. In approving dissolution, incorporators or directors shall adopt a plan of dissolution indicating to whom the assets owned or held by the corporation will be distributed after all creditors have been paid.
   • • Assets cannot be transferred until 20 days after giving notice to attorney general
     • Assets must be transferred to another tax-exempt organization or to the government, and in accordance with your own bylaws
     • If the organization cannot satisfy its debts and has insufficient remaining assets, bankruptcy is an  – and may be the best – option
4. Create articles of dissolution (MCA requirements here)
5.   Notice to Attorney General (at or before delivering articles of dissolution to Secretary of State), including copy or summary of the plan of dissolution. The AG will/should provide written consent to your nonprofit that it can proceed with the dissolution. The form for that is here.
   1. • After assets have been transferred (20 days after notice or after AG gives consent), board shall deliver a list showing where assets were transferred or conveyed.
6. File Articles of dissolution with the Secretary of State – Around a $15 fee to file these.
7. File Schedule N Form with IRS notifying of dissolution when you next file your Form 990 or 990-EZ, as well as copies of your articles of dissolution, resolution to dissolve, and plan of dissolution.

As you have questions, please reach out to [email protected] or call us at 406-447-3717