Has your nonprofit reached the end of its lifespan? It happens. Funding dries up, the mission is accomplished, or more nimble nonprofits overtake the space. Whatever the reason, when a nonprofit no longer wants to operate, it cannot simply close its doors. Instead, there is a legal process to dissolve a nonprofit in Pennsylvania.
How to Dissolve a Nonprofit in Pennsylvania
The process to dissolve a nonprofit in Pennsylvania is not a difficult one, but it is lengthy. Expect it to take 6 to 12 months if there are no legal challenges.
Step 1: Board of Directors Approval. The Board of Directors must approve a resolution to dissolve the nonprofit. If the nonprofit has voting members, then oftentimes the members must also approve the dissolution.
Step 2: File a Final IRS Form 990. A nonprofit must continue to file its annual Form 990 until it officially ceases to exist. File your final From 990.
Step 3: Obtain Tax Clearance Certificates. Many, but not all, nonprofits collect and remit taxes to Pennsylvania, such as sales tax and employee withholdings. Even if your nonprofit does not, submit an application for a tax clearance certificate. You must submit it to the Department of State with your Articles of Dissolution.
Step 4: Notify your creditors. Nonprofits must notify the public, known creditors, and municipalities of the nonprofit’s intention to dissolve. This allows creditors a final chance to collect on unpaid debts.
Step 5: Notify the Attorney General. The Pennsylvania Attorney General protects charitable assets in Pennsylvania. It has the authority to intervene and object when a nonprofit seeks to dissolve and distribute its remaining assets. Always contact the Attorney General’s Office. They will ask you to submit specific information. The Office will review your reasons for dissolution and your plan to distribute the remaining assets. Once the Attorney General’s Office approves your plan, you can proceed to the next step.
Step 5: Obtain Court Approval. Ask the Court to approve the plan of dissolution and distribution of assets.
Step 6: Winding Up (Distributing Assets). Follow exactly the plan of distribution you submitted to the Attorney General and the Court. If you said you would distribute your assets to ABC nonprofit, you cannot change your mind and give them to FGH nonprofit.
Step 7: File Articles of Dissolution. Even though the Court signs off on your plan to distribute your assets, the legal entity still exists. You must file Articles of Dissolution with the Department of State in order for the nonprofit entity to official cease to exist.
Step 8: Follow-up with the Attorney General. Finally, keep the Attorney General in the loop. Send copies of the Court Order approving the dissolution and evidence the assets were distributed in accordance with the distribution plan. The Attorney General will not be pleased if you deviate from this plan (see Step 6), so do what you promised to do.
Again, expect the process to take 6 to 12 months. In the meantime, while you complete the process, the Board of Directors must continue to safeguard the nonprofit’s assets, file any legal reports (such as the IRS Form 990 or the Pennsylvania Charity Public Disclosure Statements.
Need Help Dissolving Your Pennsylvania Nonprofit?
Attorney Christine Kuntz will help you navigate the dissolution process and make the transition as seamless and painless as possible.