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How do you close a nonprofit? If you sell the assets, what happens to the money?

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How do you close a nonprofit? If you sell the assets, what happens to the money?

Our nonprofit corporation is in real cash trouble and the board is thinking of closing up. Where can we go for information on how to close and sell off the building and land? And what happens to the money?

Since you appear to have some assets even if not enough current cash to continue operations, I recommend that you consult with a knowledgeable attorney about a formal dissolution of the corporation under your state law.  The procedures are usually technical, but not overly burdensome.

As to what happens with the net remaining assets, it depends on the type of organization you are.  If you are a charitable organization, the net remaining assets must be utilized for charitable purposes. That is a requirement for federal 501(c)(3) organizations and usually a state law requirement as well. Normally a charitable organization going out of business makes a final grant to one or more other charities carrying out similar purposes.

If, however, you are a social club or some other type of non-charitable organization, it may be possible to distribute the assets to members of the organization.  If that’s the case, you may find you have a lot of members who haven’t been around for a while.  The lawyer should be able to help you out on these issues.

Thursday, February 17, 2011


If a small (revenues less than ($750K annually) 501(c)3 corporation with land and a building decides to sell that land and building and close its doors due to financial strains, can the cash be used to continue operations or must it be distributed to other, qualifying 501(c)3 corporations?

Selling the real estate does not necessarily equate to a dissolution.  Many organizations sell their property but use the money to continue the program in a different location.  You can to the same thing if you wish.  —Don Kramer

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