In today’s challenging economic climate, not-for-profit organizations may be some of the organizations hardest hit. Much like a for-profit corporation, not-for-profit corporations are also vulnerable to failure. When faced with a situation where a not-for-profit organization can no longer keep its doors open, the leadership of that organization may be unfamiliar with what procedures must be followed in order to properly dissolve the not-for-profit corporation.
In Indiana, the dissolution process for a not-for-profit corporation must start with a vote of a majority of the board of directors to dissolve the corporation. The vote must occur at a properly noticed meeting of the board of directors. Once the board of directors has voted to dissolve the corporation, then there is a series of filings that must be made with the Indiana Secretary of State, the Indiana Department of Revenue, the Indiana Department Workforce Development, and the Indiana Attorney General’s Office. There is also a federal filing that must be made with the Internal Revenue Service.
The dissolved corporation must also go through a process of giving notice to claimants that may have a claim against the not-for-profit corporation. Indiana law sets out both the method of notice and the deadlines by which claims must be submitted.
Once dissolved, a corporation can only continue its existence for the period of time that it takes to wind up and liquidate the corporation’s affairs. This includes discharging the corporation’s liabilities and obligations, returning any property that is required to be returned as a result of the dissolution, following any provisions in the company’s articles or bylaws regarding disposition of property upon dissolution, or transferring the corporation’s assets to another 501(c)(3) corporation if no other provisions exist in the corporation’s articles and bylaws for disposition of property upon dissolution.
Directors of a not-for-profit corporation facing dissolution need to be aware that there are requirements that must be followed in order to properly dissolve the corporation and terminate its existence. If you have questions regarding the proper procedure for dissolving a not-for-profit corporation, feel free to contact any of the attorneys in Bamberger’s Business and Corporate Services Section.
Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: lscott@bamberger.com
Tags: dissolution of organization, economic challenges, laura scott, not-for-profit corporation
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