An organization has to make the difficult and momentous decision to close for two kinds of reasons: (1) involuntary reasons (e.g., an external shutdown is required, usually initiated through the state’s attorney general’s office or the office of the secretary of state) and (2) voluntary ones (e.g., mission has been achieved, a financial crisis has taken place, board and staff have exhausted their energy and ideas, or internal interpersonal disputes have overtaken an organization).

By federal and state law, nonprofit organizations should outline in their articles of incorporation and bylaws all tasks and responsibilities regarding organizational dissolution, and these policies must be followed. But most nonprofit organizations have not drafted such policies and procedures. The purpose of this article is to outline the steps and tasks involved in dissolving a nonprofit organization. And it may serve as a guide for establishing a protocol for an “honorable and respectful transition for all.”1

Our approach is based on four essential principles:

  • Like any organizational initiative, dissolution should be carried out with interpersonal integrity.
  • A successful dissolution preserves an organization’s legacy and contributes to a positive collective memory of the organization.
  • Laying the groundwork is essential to a successful outcome. Many authors and theorists have addressed this stage of the process. The Gestalt International Study Center discusses balancing the intimate with the strategic2, numerous authors talk about attending to group dynamics, Eunice Parisi-Carew and Ken Blanchard offer the team charter model3, and a model of governance as leadership has also been developed4. But no matter what it’s called or how you choose to address it, we are convinced that organizations must pay as much attention to the process of laying the groundwork for a closure as they should to the tasks of the dissolution itself.
  • During this process, an organization should rely on a network of professional nonprofit experts, legal counsel, human resources support, and dissolution planning and implementation. While finances may be paramount in the minds of board members and senior staff, relying solely on internal resources may lead to a less-than-satisfactory outcome. Using expert input during the dissolution process can better ensure that all aspects are thoroughly addressed and that a board and staff groups are included in the right way and at the right time.

The process of closing a nonprofit organization takes many months. It is important that those implementing the dissolution are prepared for this time frame and equipped with responses to questions from the community about the status of the process.

Read the source article at nonprofitquarterly.org