How to dissolve a nonprofit, step by step

1. The board votes, and writes it down

Read your bylaws and your articles (in Texas, the certificate of formation) before the meeting. They say who must approve a decision to close, and some say what has to happen first. If your nonprofit has voting members, they may need to approve it too.

• Hold the vote at a properly called meeting, and record it in the minutes.
• In the same meeting, adopt a plan for winding up: who handles each step, and where the remaining assets go.
• Name one person to keep the records once you have closed. The IRS asks for the last officers' names and phone numbers, so they should be easy to reach.

2. Plan where the money and property go

Debts come first. After that, a 501(c)(3) can't hand what's left to its board, staff or founders. Your articles have a dissolution clause that says where it goes, usually another 501(c)(3) or a government body for a public purpose. See the purpose and dissolution clause for the IRS language.

• List everything you own. Cash, equipment, vehicles, property, deposits, and money people still owe you.
• List everything you owe. Payroll, rent, loans, cards, vendors, and any taxes.
• Pick the receiving charity. Choose one with the same or a similar purpose, and confirm it will accept. Write down what each one gets and what it's worth. The IRS asks for both.
• Handle restricted gifts on their own. A gift given for one purpose or one period has to go to a charity that can keep using it that way. If that's impossible, you may need a court to change the restriction. The Texas Attorney General says this plainly.
• Read every grant agreement. Some say what happens to unspent money if you close. Tell those funders early.

3. Tell the people who count on you

It's a hard conversation, and a kinder one when it comes early. Tell your staff, volunteers, funders and partners before anyone hears it from someone else. Give them a last day of services, and refer the people you serve to an organization that can help them next. Tell your landlord, your insurer and your vendors in writing, and ask each one what notice your contract needs.

Ask your insurance broker what cover you need after you close. Claims can arrive late, so don't cancel any policy until you have asked.

4. Final payroll filings, if you had employees

The IRS lists these on its closing a business page:

• Form 941. On your last one, check the box that says your business has closed, and enter the date you paid final wages on line 17.
• Form 940. Check box d, "Final," in the Type of Return section. Most 501(c)(3)s don't file Form 940 at all, since the IRS says they generally aren't subject to federal unemployment tax. Your payroll provider or accountant will know.
• Forms W-2 and W-3. Give each employee a W-2 by the due date of your final Form 941. Send Copy A to the Social Security Administration with Form W-3.
• Form 1099-NEC. File one for each contractor you paid enough to need one in the year you close. Check the current threshold in the Form 1099-NEC instructions.
• Your state's unemployment account. Close it with your state workforce agency. In Texas that is the Texas Workforce Commission.

Keep employment tax records for at least four years, the IRS says.

5. File with your state (the Texas steps)

Once the debts are paid and the assets are given out, you file to end the corporation. In Texas, a nonprofit corporation uses Form 652, Certificate of Termination of a Domestic Nonprofit Corporation or Cooperative Association. Don't use Form 651, which is for other kinds of entities.

• The fee is $5. That's the fee printed on the form, revised September 2026.
• What it asks. Your name, formation date and Secretary of State file number, and the names and addresses of your governing persons (your directors).
• What an officer certifies. That winding up is complete under the Business Organizations Code. That your property went out under chapters 11 and 22 of that code. That no lawsuit is pending, or that you have provided for one. And, if you held property for charitable purposes, that it went out under a plan of distribution you adopted.
• Who signs. An officer of the corporation, under penalty of perjury.
• When it takes effect. On filing, or on a later date up to 90 days after signing.
• How to file. Online through SOSPortal, by mail to P.O. Box 13697, Austin, TX 78711-3697, or in person at 400 W. 15th St., Austin.

The Texas Attorney General's office oversees charities in Texas. Its guide sums it up the same way: vote, pay all debts, give what's left to a charity with the same or a similar purpose under a plan of distribution, and file the certificate. It also reminds you to check your own certificate of formation and bylaws for extra steps.

If you hold a Texas sales tax permit, file a final sales tax return and close the permit with the Comptroller, using its close business location form.

Outside Texas? Every state has its own form, usually called articles of dissolution or a certificate of dissolution. Some states also want notice to the Attorney General before you give out charitable assets. Find your filing office in the NASS list and your charity regulator in the NASCO list.

6. File a final return with the IRS

You don't ask the IRS for permission to close. You tell it, on your last annual return. Use the form you already file (not sure? see which Form 990):

• Form 990. Check "Final return/terminated" in box B at the top. Answer yes at Part IV, line 31, and at line 32 if you gave away more than 25% of your net assets. Complete Schedule N.
• Form 990-EZ. Check "Final return/terminated" in box B. Answer yes at Part V, line 36. Complete Schedule N.
• Form 990-N, the e-Postcard. Answer yes to the question that asks whether your organization has terminated or gone out of business.
• Form 990-PF, for a private foundation. Check "Final return" in box G, and attach a statement on the wind-up, the plan, and who received what.

Schedule N lists each asset you gave away, its fair market value, the date, and who received it. With the 990 or 990-EZ, include certified copies of your articles of dissolution (in Texas, the filed Form 652) and the board resolution or plan.

When it's due. A final return is due by the 15th day of the fifth month after the date you closed, not on your normal schedule. Close on June 30, and it's due November 15. See Form 990 deadline for how the dates work.

If your exempt organization never had to file an annual return, write to the IRS instead: TEGE Correspondence Unit, P.O. Box 2508, Room 6403, Cincinnati, OH 45201, or fax 855-204-6184. Send your filed articles of dissolution (or, if you never incorporated, the minutes of the vote), and a list of your last officers or directors with daytime phone numbers. A 501(c)(3) adds a statement, signed by an officer, describing where the assets went.

Once the IRS has your notice, it closes your account, takes you off its list of exempt organizations, and stops sending letters about missed returns.

7. Don't just stop filing

It's tempting to let a nonprofit quietly fade out. Here's what happens if you do. Miss three years of returns in a row and the IRS revokes your exemption automatically. In Texas, the Secretary of State can end a nonprofit corporation that stops filing its reports or keeping a registered agent. Letters about missed returns keep coming to the last officers, and the assets may not reach the charity you meant them for. Closing on purpose takes a few months and costs $5 in Texas.

8. Export everything before you cancel anything

Once a vendor deletes your account, the records are gone for good, so do this before you cancel any app and before you close the bank account that pays for them.

• Download a full export from every app. Your donor list with gift history, volunteer records and hours, the email list, accounting files, and every shared drive.
• Ask each vendor two questions. How long after you cancel can you still export? When is the data deleted?
• Keep the papers. Board minutes, your articles and bylaws, the IRS determination letter, past 990s, the filed Form 652 and the final return, payroll records, and your Schedule N records of where the assets went.
• Store them where the records keeper can reach them, in an account that won't close with the organization, and make a second copy.
• Move your web address last. Keep the domain renewed for a while, or hand it to the receiving charity, so old links and emails still reach someone.

A wind-down order that works

1. Month 1: decide and tell

   The board votes and adopts a plan. Tell staff, volunteers, funders and partners. Pick the receiving charity and ask your broker about insurance.

2. Month 2: wind up

   Collect what you're owed. Pay what you owe. End leases and contracts. Run final payroll and file the final payroll forms. Export every app's data.

3. Month 3: give out and file

   Transfer the remaining assets under the plan, and keep a receipt for each. File Form 652 in Texas, or your state's form. Close the sales tax permit and any state charity registrations.

4. Within five months of closing: the IRS

   File the final Form 990, 990-EZ or 990-N. Then close the bank account, cancel the apps, and hand the records to their keeper.

Done in this order, what your team built goes on to a charity doing the same work, and your records stay in safe hands.

This is general information, not legal or tax advice. Each step was checked against the official source on 7 October 2026. Forms and fees change, so check the current page before you file, and ask your accountant or lawyer how it applies to you.

Where Ember fits

Take everything with you

If you use Ember, an owner or admin can go to Settings, Organization, Your data and choose Download everything. You get a zip file with one spreadsheet for each kind of record. When you're done, the owner can archive the organization. Nothing is erased for 30 days, and Ember keeps a short closure record with your organization's name, EIN and dates.

Sources: IRS: Termination of an exempt organization, IRS: Closing a business, Instructions for Form 940 (2025), IRS Publication 4779, IRS: Automatic revocation of exemption, Texas SOS: Form 652, Texas SOS: Form 652 instructions, Texas Attorney General: Closing a charitable organization, Texas Comptroller: Close business location, NASS: Corporate registration, NASCO: State charity offices. All read 7 October 2026.