Dissolving a Nonprofit

There are a variety of reasons why a board may decide to dissolve or sunset a nonprofit. Perhaps the mission of the organization has been fulfilled. Perhaps financial constraints have dramatically impacted the long-term sustainability of the nonprofit. Maybe your nonprofit is merging with another nonprofit and dissolution is required as a result.

Whatever the reason, the decision to sunset an nonprofit can be a difficult one — from both a logistical and emotional perspective — but there are steps you can take to ensure that the process of winding down your nonprofit is as smooth as possible.

Along with the Minnesota Council of Nonprofits (MCN), other expert-driven nonprofit support organizations such as the National Council of Nonprofits (Dissolving a Nonprofit Corporation), Propel Nonprofits (Strategic Sunsetting), LegalCORPS (Guide for the Volunteer Dissolution of Minnesota Nonprofit Corporations), and NOLO (How to Dissolve a Nonprofit Corporation in Minnesota) provide robust resources to help guide nonprofit boards interested in learning more about dissolution of their organization. The steps and tips below echo many of those same steps and insights, as well as shed light on other considerations of which nonprofits may want to be aware.

Disclaimer: Deciding to dissolve a nonprofit will impact the organization’s status on both a state and federal level. MCN strongly recommends seeking guidance from a lawyer, accountant (regarding final IRS filings), or other professional advisor who will be able to guide you through the necessary steps to notify the appropriate state and federal agencies once the nonprofit is no longer operatingThis article does not constitute legal advice.


The board of directors plays a crucial role in the process of winding down, from both a legal and strategic perspective, throughout the entire process of dissolution. The first step requires the board to reach consensus and take an official corporate action (a vote that is documented in minutes of the meeting) to affirm and record that dissolution is correct and preferred path forward.

The board’s role in deciding whether or not continuing operations is in the best interest of the organization starts long before a formal “plan of dissolution” is drafted, and continues after the vote to adopt any such plan. Some considerations for board members in this stage may include:

  • Determining if an alternative to shutting down permanently is an option. Similar to for-profit entities, nonprofits have the option of reorganizing their structure through the bankruptcy process.
  • Checking the nonprofit’s articles of incorporation (or “certificate of incorporation”) and bylaws to gain a full picture about what may be required of the organization in the event that dissolution is pursued.
  • Board must vote to dissolve the organization. This includes approving a “plan of dissolution”. This vote must be documented in meeting minutes.
  • Board will submit necessary paperwork (see below).
  • The board chair and treasurer will have ongoing IRS reporting responsibilities for several years after the formal shut down.

If the board determines that dissolution is the best option for the nonprofit, they must conduct a formal vote to dissolve the organization. This includes approving a “plan of dissolution.” This vote must be documented in meeting minutes.

Board members may not be aware that the process of “winding down” the organization takes time, and in fact is likely to continue for several months after operations have ceased, so it is important that at least the minimum number of board members required by the bylaws remain in place to help with the dissolution process.

The organization is not officially dissolved until the dissolution papers are filed with the state, and other final steps, such as filing the final annual report (Form 990) with the IRS, are completed. There may be additional corporate actions that will need to be taken well after the last day of active operations.

How the board communicates with the community, employees, volunteers, and other stakeholders (including donors) is important. It may be challenging to balance transparency with respecting confidentiality, but the public will expect the nonprofit’s board to be transparent while also respecting the confidential nature of some financial or personal elements of the winding down process.


Once leadership determines that dissolution is the best path forward, the organization should develop a “plan of dissolution.” A plan of dissolution is essentially a written description of how the nonprofit intends to distribute its remaining assets and address its remaining liabilities. Eventually, a “certificate” or “articles of dissolution” will be filed with the state agency that handles corporate registrations.

Your organization’s plan should include all the assets and liabilities you can identify and describe how liabilities will be satisfied, which nonprofits will receive the remaining assets, and the fair market value of those assets (see Step #4 for more). It’s a good idea for the board to also document who will be responsible for what, and by when, in order to maintain consistency and accountability throughout the dissolution process.

Per LegalCORPS’ Guide for the Voluntary Dissolution of Minnesota Nonprofit Corporations, the plan of dissolution must provide that the assets of the corporation are distributed in the following priority:

  1. Any assets which were received by the corporation from a donor subject to their use for a specific purpose must be used for that purpose;
  2. Payment of the costs and expenses of dissolution, including filing fees with state agencies and professional fees of any finance or legal professionals who assist with the dissolution;
  3. Payment of all debts, liabilities and obligations of the corporation;
  4. If the corporation’s Articles of Incorporation or Bylaws require a particular distribution of assets upon dissolution, that distribution must be complied with (for example, if the corporation is a local chapter of a national corporation, its Articles or Bylaws may require the distribution of assets upon dissolution to the parent corporation);
  5. Distribution of any remaining assets held for a charitable or public use or purpose.

After your board (and, where applicable, voting members) have approved the dissolution, you must file two notices of intent to dissolve: one with the Minnesota Secretary of State and one with the Minnesota Office of the Attorney General. No form is available for the notice to be submitted to the SOS, so you will have to draft your own. The notice of intent to dissolve to be submitted to the SOS must contain:

  • the name of your nonprofit
  • the date and place of the meeting at which the resolution was approved by the board under, and by the members under if applicable; and
  • a statement that the requisite approval of the directors and members was received.

A notice of intent to dissolve form is available on the Attorney General’s website. The notice for the Attorney General’s office requires substantially more information than the notice for the Secretary of State, including detailed information about your nonprofit’s assets and how they will be transferred. 

Note: This notice to the Attorney General’s Office and the 45-day waiting period must occur before an organization submits articles of dissolution to the Minnesota Secretary of State’s office.


As soon as the required notices have been filed with the offices of Minnesota’s Secretary of State and Attorney General, the board may begin collecting any debts owed to the organization. During this time, the corporation must cease carrying on its regular activities and may act only for the purpose of winding down the affairs of the nonprofit.

It is also during this period that all of your nonprofit’s liabilities, including taxes, need to be identified, including future contractual obligations. The board should make a plan to pay off current debts and terminate recurring or future liabilities. It is vital to determine whether existing and future liabilities can be satisfied by existing cash or whether some assets need to be sold to pay them.

Final financial statements should reflect no remaining liabilities (or assets). If your organization cannot satisfy its debts and has insufficient remaining assets, the transition board may want to consider bankruptcy. Due to the legal complexities of such financial obligations — and the potential negative impacts of incorrectly addressing them — your nonprofit may be best served accessing the expertise of an accountant during this stage.


Much in the same way that a nonprofit cannot be formed or operated for the purposes of “private inurement,” the dissolution process your nonprofit cannot result in its property being distributed to individuals, including board members, other volunteers, employees, or those served.

If a nonprofit has physical assets and is unable to find a nonprofit or agency to accept them, it can sell the assets, as long as the individual or entity purchasing the asset is paying “fair market value.” In such cases, the National Council of Nonprofits recommends nonprofits:

  • Start with an inventory of assets, then plan which assets will be sold/transferred/contributed.
  • Seek external appraisals/valuations, when needed.
  • Don’t overlook trademark registrations as a potential asset that need to be transferred.
  • Document all transfers and sales, noting the fact that transfers of assets are only to other entities with tax-exempt public charity designation (501(c)(3)) or to a federal/state/tribal/local government.

When a nonprofit winds down, there are legal implications related to termination of leases and other contracts, such as those relating to operations (e.g., physical office space, office equipment, hardware), programs, financial management (i.e., the nonprofit’s auditor), and potentially human resources (i.e., independent contractors and consultants).

Additionally, existing relationships with staff, donors, volunteers, or clients may need to be addressed thoughtfully and with as much lead time as possible, including:

  • Existing Contract Holders: Read through each of your nonprofit’s existing contracts to determine the appropriate ways to handle non-renewal or termination of the contract, noting how much notice is required to terminate each contract, as well as any penalties that your organization will be responsible for as a result of early termination.
  • Employees: Once the decision to dissolve the nonprofit has been determined, the board should notify employees as soon as possible, sharing with them the the timing of their last day of work, their eligibility for unemployment compensation, and other information that may assist them with their employment transition. Per Propel Nonprofits (Strategic Sunsetting), nonprofits “must also follow the same process as you would if you were ending employment for any other reason… This process will include providing a W-2, paying out accrued wages, and paying out benefits. This process may also vary based on your HR policies – it is critical that you refer to and follow your own established rules and practices.” (You can find more information for the state of Minnesota requirements here.)
  • Constituents and Clients: The dissolution of your nonprofit may leave beneficiaries of your organization’s services in need of alternative accommodations. Communicate with such individuals as far in advance as possible and, when possible, provide connections to new services or resources that may be of assistance as they transition away from those you historically provided.
  • Donor and Volunteers: Your organization should also inform volunteers, donors, sponsors, and vendors about the decision to wind down. Make sure to provide all donors for the time period prior to closure with gift acknowledgements.

Additionally, nonprofits will need to consider which organizational documents will need to be retained, even after the dissolution process. Learn more about document retention.


STEP #6: Notice of Transfer to Attorney General

Once a nonprofit has completed its plan of dissolution, with assets having been transferred, the board of directors is required to deliver to the Minnesota AG’s office a list of individuals or organizations to whom the applicable assets were transferred. The list must include the name and address of the recipient and a full description of the asset that was transferred.


After notifying the Minnesota Attorney General’s office of the successful transfer of assets, the nonprofit should file formal Articles of Dissolution with the Minnesota Secretary of State.

Per LegalCORPS’ Guide for the Volunteer Dissolution of Minnesota Nonprofit Corporations: “Before filing the Articles, [the corporation] must make sure that (1) it has either paid claims of known creditors or provided for such payment; or (2) if notice has been given to creditors, the 90-day notice period has expired and payment has been made or provided for to creditors that came forward; or (3) more than two years has elapsed since the date of filing of the notice of intent to dissolve.”

Per Nolo’s How to Dissolve a Nonprofit Corporation in Minnesota, the Articles of Dissolution must state:

  • whether you gave notice to the creditors and claimants of your nonprofit by publication and mailings
  • if you did give notice, the last date on which the notice was given and (a) that the payment of the creditors and claimants filing a claim within the time period required by law has been made or provided for, or (b) the longest period under the law within which claims must be brought has expired
  • if you did not give notice, that your nonprofit’s debts, obligations, and liabilities have been paid and discharged or that adequate provisions have been made for them
  • that the remaining assets of the corporation have been distributed according to the NCA’s order of priority, or that adequate provision has been made for the distribution
  • that there are no pending legal, administrative, or arbitration proceedings by or against your nonprofit, or that adequate provision has been made for the satisfaction of a judgment, order, or decree that may be entered against it in a pending proceeding; and
  • if applicable, that you sent a notice of intent to dissolve to the AG and the waiting period has expired or has been waived by the AG.

There is no form or template available from the SOS for your articles of dissolution, so nonprofits will need to draft and file this document on their own or with the guidance of an attorney.

Note: Once the Articles of Dissolution have been submitted, all of the nonprofit’s programming (i.e. – the mission/work detailed in its founding articles and tax-exempt application) must cease. All work and resources remaining after submission must be working toward the closure.


STEP #8: Notify Other State Agencies

Once the Articles/Plan of Dissolution are filed with the Minnesota SOS, the nonprofit representatives will need to contact other applicable state authorities to inform those offices that the nonprofit is no longer operating. State agencies that may be relevant for your nonprofit include the Minnesota Department of Revenue (regarding any applicable state taxes), Minnesota Department of Labor (if the nonprofit had employees), and any state licensing authorities (such as Minnesota Department of Health or Human Services) that may have accredited or licensed the nonprofit’s activities.

Minnesota law requires all employers who must provide notice under federal WARN laws (Worker Adjustment and Retraining Notification) to notify the Minnesota Department of Employment and Economic Development’s dislocated worker unit with the names, addresses and occupations of the employees whose jobs will be terminated.


The final step of the dissolution process is to let the IRS know that the organization is officially dissolved in the state of Minnesota.

The way to inform the IRS of the organization’s dissolution is by filing the organization’s final IRS Form 990 (and 990-T if applicable). Typically, Form 990 is due within 5 months and 15 days after the last day of the organization’s most recently completed fiscal year. That said, if a nonprofit closes its doors mid-year, the organization can file its 990 as soon as it has completed all the state dissolution requirements, even if the fiscal year has not ended.

Note: if your organization files either the regular IRS Form 990 or 990-EZ:

  • Under Box B on the header of the first page, you must check the box that states “Final return/terminated.”
  • Submit Schedule N, which documents the tax-exempt entity(ies) to which your organization is transferring its remaining assets. Dissolving nonprofits are required to report a description of the assets, the date of distribution, the fair market value of the assets, and information about the recipients of the assets, and Schedule N serves as a good guide for what details need to be documented by the organization as it is distributing its assets.

Reflect On and Honor the Work

It goes without saying, but dissolving can drum up stress, regrets, and strong emotions. Even so, the individuals responsible for your organization’s myriad accomplishments over the years should take time to recognize the significance of all that came prior to the decision to sunset the organization.

As Propel Nonprofits states: “Making space for grief throughout your process while celebrating your organization’s achievements will allow for a greater sense of closure. Whether it culminates in a final event, a collection of stories, a physical memorial, or something else entirely – create a way honor the work and its legacy.”

While the work may be ending, your nonprofit’s impact lives on.



Disclaimer: Information on this website is provided for informational purposes only and is neither intended to be nor should be construed as legal, accounting, tax, investment, or financial advice. Please consult a professional (attorney, accountant, tax advisor) for the latest and most accurate information. The Minnesota Council of Nonprofits, nor any other organizations referenced in the information above, make no representations or warranties as to the accuracy or timeliness of the information contained herein.