What Happens to the Assets of a Dissolved Nonprofit? Voluntary Dissolution of a Nonprofit

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Perhaps the organization has fulfilled its mission.

How to Dissolve

With the resolution in hand, California law provides for voluntary dissolution in one of three ways:

  • by majority approval of your nonprofit’s members;
  • by action of your directors followed by a vote or other consent of the members;
  • or if your nonprofit does not have members, by a vote of the directors.

Steps to Take After Deciding to Dissolve

Stop transacting business, except to wind down activities.

  • Assets can only be used for exempt purposes and may not go to staff or board members.
  • All remaining assets must be transferred to another tax-exempt organization or the government.
  • Assets can be sold if the buyer is paying fair market value.

To formally dissolve a 501(c)(3):

  1. Confirm compliance with all registration and filing requirements
  2. Take and confirm the required board action
  3. Complete a Form PC-F
  4. Complete the Dissolution Worksheet

What Happens to the Assets?

When a nonprofit shuts down, by law, its remaining assets must be transferred to another tax-exempt organization or to the government.

Nonprofit Closure and Impact

Nonprofit failure not only discontinues services to those in need but can also impact the community economically.

Accountability and Regulations

Nonprofits must remain accountable to donors and the public. The leadership is scrutinized, especially when dealing with financial matters post-dissolution.

Board committees and executive directors play crucial roles in holding the nonprofit accountable, and the state government regulates nonprofit activities. A 501(c)(3) status does not require renewal but does require annual reporting to the IRS.

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