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Our nonprofit is dissolving, what do we do with are remaining funds?

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Our nonprofit is dissolving, what do we do with are remaining funds?

Our nonprofit softball team is dissolving after less than a year in existence. We have some money left over from sponsorships that we solicited but did not use. Some of the parents want us to distribute the money to them since they paid the players’ fees. We were thinking of transferring the money to another team and might merge. What should we do?

You don’t say whether your organization is a charitable organization. It could be a nonprofit without being considered a charity. (See Ready Reference Page: “What Do We Mean When We Say ‘Nonprofit’?”
Since you solicited sponsorship contributions, however, I assume it is a charitable organization. In that case, under federal requirements for Section 501(c)(3) charitable organizations, if you dissolve, you must transfer the surplus for another charitable purpose and you may not divide it among individuals. If there is a similar team that is also recognized as a charity, it might be an appropriate recipient. (See Ready Reference Page: “Articles of Incorporation Establish Basic Form of Nonprofit Corporations.”)
Your state Attorney General may also have an interest in seeing that the funds are devoted to charitable purposes, and your state nonprofit corporation law may deal with the situation on dissolution. If you merge with another charity, the money would automatically go to the surviving corporation. These principles would apply to any charitable organization in your situation, not just to sports teams.
Sunday, September 27, 2009

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