Question: How Do You Shut Down a Nonprofit?
It's the last thing you want to do, but sometimes it's better to close your nonprofit. Here are the steps you should take:
Answer:
- Let your employees know about an impending closure. If possible, provide job counseling and severance pay.
- Make sure that your clients are taken care of. Perhaps they can be referred to another nonprofit. Subscribers or members can be given refunds.
- Let your donors know what is happening. Do this before they find out from the rumor mill or in the news.
- Pay debts. Either pay your outstanding debts or work with your suppliers to settle those debts.
- Document the life of your nonprofit. Write down what your nonprofit has done, its history, its research, knowledge gained. Give the documentation to a library or historical society. Pass it on to other nonprofits that might benefit from your experience.
- Honor staff, board, and volunteers. Give them credit and thanks.
- Hold a board meeting where the board votes to dissolve the organization. Record that decision in the board minutes.
- Inventory all assets, such as money, furniture, web domains, property, mailing lists, etc. Then pass them on to another nonprofit, sell them and use the proceeds to pay your bills, or return them if appropriate.
- File a formal intent to close with your state (usually the Secretary of State office).
- File a final Form 990 tax return with the IRS within 4 months and 15 days of terminating your organization.
Resources:
- Nonprofit Kit for Dummies, 3rd Edition, Stan Hutton and Frances Phillips, Wiley 2010.
- Starting and Managing a Nonprofit Organization: A Legal Guide, 5th Edition, Bruce R. Hopkins, Wiley, 2009.
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