How should a nonprofit organization distribute its assets upon dissolution?

When a nonprofit organization dissolves, it must distribute its assets in a way that is consistent with its foundation documents, including its articles of incorporation, bylaws, or prior agreements. In California, assets must also be distributed as required by the state’s Nonprofit Corporation Law. The Nonprofit Corporation Law dictates that “upon dissolution, a nonprofit corporation must distribute its remaining assets to one or more nonprofit corporations, or for a charitable or public purpose.” The assets cannot be distributed to the directors, officers, or members of the nonprofit. As part of the dissolution process, the nonprofit must file a Certificate of Cancellation with the California Secretary of State. The Certificate of Cancellation must include the name, address, and nature of the entity that is to receive the assets of the now-dissolved nonprofit. The distribution process will also depend on the type of assets held by the nonprofit. Cash, real estate, and equipment, for example, must each be distributed differently. For cash and similar liquid assets, the distribution should happen as soon as possible after dissolution. Real estate and equipment must be sold, and the proceeds from the sale used to complete the distribution process. Nonprofits should consult a lawyer to ensure that their dissolution and asset distribution processes follow the law and align with the organization’s foundation documents. This will help ensure that the organization’s hard-earned assets will be distributed in an appropriate way.

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How should a nonprofit organization distribute its assets upon dissolution?

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