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Tips and Answers
to Your Questions
Implementing a Partnership
Once you file for dissolution of a corporation,
what happens to the assets of that corporation?
Assuming we are discussing a nonprofit 501c3 corporation, there are
very serious restrictions ion what can happen to these assets. In general,
they must be preserved for the cause to which they were originally
dedicated. If there are donor-restricted grants or funds, these must
be spent as promised or returned to the donor, if possible. If there
are unrestricted assets, such as a building, funds in an account, office
equipment, and the like, these must be transferred to another nonprofit
that is as close as possible in purpose to the dissolving organization.
The one thing that absolutely cannot happen is that the assets are
distributed to board members, supporters or staff. This is because
those assets were acquired as property of a tax exempt charity. Under
the IRS's watchful eye, any nonprofit resources must remain dedicated
to a similar nonprofit purpose.
Of course, if you are talking about a couple of old computers and
desks, that is going to be a different thing than if the assets involve
cash, or are substantial. There is also the question of debt. Before
dissolving and disposing of assets, be sure to pay off back payroll,
payroll taxes, and debts of any kinds. Then you are disposing of the
net assets that remain.
As you can see this whole area can get a little complicated. If the
assets are substantial, or if they involve any cash, or cash equivalents,
be sure to get legal advice from a competent nonprofit specialist attorney.
In fact, you should probably consult an attorney early in the dissolution
process so they can guide you in dealing with any creditors, as well
as with state and federal regulators.
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