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  Tax Exemption Home: Non-Profit Services: Dissolutions
 

Dissolutions

To formally dissolve an organization, dissolution documents must be filed in compliance with the Secretary of State's Offices of where the entity was formed. In addition, requirements regarding outstanding Franchise Tax balances must be met. We offer complete dissolution services for $99 plus any state fees.

There are certain common steps involved in dissolving an organization. Basically the following six steps are involved in the dissolution.

  1. Director action. To dissolve a company, it is necessary for all the directors to agree on the situation and what will follow after the organization is wound down.

  2. Filing the articles of dissolution: The paperwork and other necessary documents need to be produced to the state, once the decision is finalized. If you have propagated your organization to other states, those states also need to be informed and files submitted. To resolve claims by notifying the creditors is considered necessary before filing a certificate of dissolution in many states. The secretary of your state’s office can provide valuable information regarding the filing of articles of dissolution. Many states prefer to have clear tax records before the filing is done.

  3. Filing of federal, state and local tax forms. Even after stopping production in your business, your tax obligations don’t stop instantly. The documents regarding the closing of the company should be submitted to the IRS and the state and local tax agencies. In case of employees, reporting the payroll may be compulsory, in order to safeguard their interests.

  4. Informing the creditors. You must inform all your creditors regarding the dissolution of the organization. Also include your mailing address for their convenience, as they may want to make a claim on the assets of the organization. Also state what documents are necessary to file for claim. After issuing notice, usually the claim should arrive within a period of 120 days. Notify the creditors regarding the deadline. Obviously a note of warning should end the notice saying the claims will not be processed if they’re posted after the due date. Sometimes even notice in the local newspapers is legally sufficient.

  5. Handling the creditors’ claims. After the creditors make their claims, it is at the organization's discretion either to accept or reject the claims. If accepted, the company should take necessary steps to pay the claimants or look for a way of settling the claim. The creditor may agree upon a percentage of the original claim amounts, if the whole amount won’t be forthcoming. However, if you reject the claim, you must inform the creditor in writing.

  6. Distribution of remaining organization assets. Your organization, in order to qualify for 501(c)(3) status, was required to demonstrate that its assets are dedicated to an exempt purpose. One common way to fulfill that requirement is for the organization's certificate of incorporation to provide that, upon dissolution, the assets would be distributed for one or more exempt purposes, or to the federal government.

    Another way to fulfill that requirement is to be able to show that upon dissolution the assets would be distributed by a court to another organization to be used in a manner as in the judgment of the court will best accomplish the general purposes for which the dissolved organization was organized. The Organizational Test Under IRC 501(c)(3). The remaining assets must be distributed in accordance with the language stated on either the articles of organization or the bylaws.

 

   
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