How to Dissolve a Nonprofit in California: Filings and Taxes

To dissolve a nonprofit in California, the board or members vote to wind up, the corporation pays its debts and distributes any remaining charitable assets to another qualifying organization, the Attorney General issues a waiver of objections, the Secretary of State files the Certificate of Dissolution, and final returns go to the Franchise Tax Board and the IRS. Skipping any of these leaves the corporation legally alive and still accruing the $800 minimum franchise tax.

Vote to Wind Up and Dissolve

Who authorizes dissolution depends on whether the nonprofit has voting members. If it does, dissolution requires approval by a majority of all members, and the board can recommend dissolution to be jointly approved by the members.¹ If there are no members, the board votes on its own. The board can also act alone after a bankruptcy order, when the corporation has been inactive for five years with no remaining assets, or when the articles require dissolution under certain conditions.

If the number of remaining directors falls below a quorum, even a sole remaining director can authorize dissolution.¹ Record the vote in the corporate minutes. You will need that documentation for the Secretary of State filing and the Attorney General’s waiver request.

File the Certificate of Election

After the vote, the corporation files a Certificate of Election to Wind Up and Dissolve with the Secretary of State and sends a copy to the Attorney General.² The certificate identifies how the vote was authorized. If members voted, include the number of votes. If the board acted alone, state which qualifying circumstance applied.

There is a shortcut. If the vote was unanimous among all members (for member corporations) or all directors (for non-member corporations), you can skip the separate Certificate of Election and instead add a statement to that effect directly on the Certificate of Dissolution.² When the vote is not unanimous, file the Certificate of Election before or at the same time as the Certificate of Dissolution.³

Wind Up Operations and Pay Debts

The board stays in charge during the winding-up period, but the job shifts to shutting the organization down: collecting receivables, converting assets to cash, terminating contracts, and paying every known debt.

All known debts and liabilities must be paid or adequately provided for before any remaining assets are distributed.⁴ Adequately provided for means either arranging for another entity to assume the obligation or depositing sufficient funds with a financial institution to cover it. If assets fall short, debts get paid as far as assets permit.

Don’t overlook obligations that stretch past the dissolution date. Lease termination fees, pending grant reporting, and insurance tail coverage all need handling. If the nonprofit has employees, California law requires final wages, including accrued vacation, to be paid on the last day of employment. Missing that exposes directors to personal liability for waiting-time penalties. Budget for these before distributing anything to another charity.

Distribute the Remaining Assets

California treats the assets of a charitable nonprofit as held in trust for the public. Remaining property cannot go to directors, officers, or members. After debts are settled, the board distributes whatever is left to one or more organizations sharing the tax-exempt status described in the dissolving corporation’s articles of incorporation.⁵

The distribution must also conform to the articles and bylaws and respect any trust restrictions attached to specific assets.⁶ If the articles name a specific recipient, that organization receives the assets. If the articles contain a general dissolution clause pointing to a 501(c)(3), the board chooses the recipient. Transfers that don’t match the stated purpose can draw an objection from the Attorney General.

Mutual benefit corporations follow different rules. Their assets don’t necessarily carry the same charitable trust restrictions and can go to the persons entitled under the articles and bylaws.³ A mutual benefit corporation that does hold assets in charitable trust must still go through the Attorney General’s waiver process.

Get the Attorney General’s Waiver

The Attorney General oversees charitable assets in California and must sign off before a public benefit or religious corporation can finalize dissolution.⁷ Without the written waiver of objections, the Secretary of State will reject your Certificate of Dissolution.

For a public benefit corporation, send the following to the Attorney General’s Registry of Charities and Fundraisers:

A waiver request letter signed by a director or attorney
Balance sheets for the last three years of activity, showing how assets were disposed of and identifying the recipients
A copy of the articles of incorporation, unless already on file with the Registry
A copy of the Certificate of Election to Wind Up and Dissolve filed with the Secretary of State
A copy of the executed Certificate of Dissolution
A financial statement showing assets reduced to a zero-dollar balance⁷

Religious corporations have lighter requirements: a waiver request letter signed by a director or attorney, plus the executed Certificate of Dissolution.

Two simplified options exist for small organizations. If the nonprofit never had assets or had minimal activity and no remaining assets, submit a Certificate 650D instead of the full package. If total annual revenue and total assets never exceeded $25,000 for the past ten years, the streamlined Certificate 650C is available.⁷

Processing runs 30 to 90 days. The Secretary of State filing cannot proceed until the waiver letter is in hand.

File the Certificate of Dissolution with the Secretary of State

Once the waiver arrives, submit the dissolution packet to the Secretary of State’s Document Filing Support Unit. The packet includes the executed Certificate of Dissolution and the Attorney General’s waiver letter, or written confirmation that the corporation has no assets.⁵

The Certificate of Dissolution requires statements about debts and assets. For debts, check one of three boxes: all known debts were paid, debts were assumed by another party (with name and address), or the corporation never incurred any known debts. For assets, confirm that remaining assets went to the appropriate recipients.³

There is no filing fee.³ When the Secretary of State accepts and files the certificate, the corporation’s legal existence ends.

Send a Final Report Back to the Attorney General

After the Certificate of Dissolution is filed, send a final packet to the Attorney General’s Registry of Charitable Trusts. Include a copy of the filed Certificate (or written confirmation of filing) and a final financial report showing all assets were distributed properly and the corporation’s balance is zero.⁵ Skipping this leaves the AG’s file open, which creates later problems for the directors and the recipient organizations.

File the Final Return with the Franchise Tax Board

Every dissolving nonprofit files a final tax return with the FTB. Depending on size and activities, that is Form 199 (California Exempt Organization Annual Information Return), FTB 199N (the California e-Postcard for small organizations), or Form 109 (Exempt Organization Business Income Tax Return).⁸ Tax-exempt churches are not required to file a final return.

Every corporation incorporated in California owes the $800 annual minimum franchise tax.⁹ A dissolving nonprofit can avoid it in the final year only by meeting all three conditions: it timely filed its final return for the preceding tax year, it stopped conducting business in California after the last day of that preceding year, and it files its dissolution documents with the Secretary of State within 12 months of filing the final return.⁸ Miss that 12-month window and another $800 comes due.

Suspended Corporations Can’t Dissolve

If the FTB or Secretary of State has suspended the corporation for unpaid taxes or unfiled returns, dissolution has to wait. A suspended corporation has no legal authority to vote, sign certificates, or file documents. File the delinquent returns, pay the back taxes and penalties, and get reinstated before starting the dissolution process.

File the Final Return with the IRS

Tax-exempt organizations do not file IRS Form 966; that dissolution form applies to for-profit companies, and exempt organizations are specifically excluded.¹⁰

Notify the IRS through the final Form 990, 990-EZ, or 990-PF. Check the “Final Return/Terminated” box in the header, answer “yes” to the liquidation or termination question, and complete Schedule N.¹¹ Schedule N asks for a description of each asset distributed, the distribution date, fair market value, and information about the recipients. The final return is due by the 15th day of the fifth month after the dissolution date.¹²

The IRS treats that final return as its notice that tax-exempt status is terminating. No separate letter is required.¹¹ Organizations small enough to file Form 990-N during their operating years have to upgrade to Form 990 or 990-EZ for the final filing, because the e-Postcard has no way to report termination or attach Schedule N.

Keep Records After Dissolution

The corporation is legally gone once the Secretary of State files the Certificate of Dissolution, but the records obligation continues. Designate a former director or officer as custodian before that final filing. Retain, at minimum:

Articles of incorporation, bylaws, and the IRS determination letter, permanently
Form 990 filings and supporting financial records for at least seven years from the date of the final filing
Payroll records, W-2s, and employment tax records for at least four years after the final payments
Documentation of every asset transfer, including recipient information, fair market values, and signed receipts, for as long as a party could challenge the distribution

If the Attorney General or IRS audits the wind-up later, the burden falls on the people who managed it. Organized records with a named custodian keep that burden manageable.

1
California Legislative Information. California Code CORP 6610 – Voluntary Election to Wind Up and Dissolve
2
California Legislative Information. California Code CORP 6611 – Certificate of Election to Wind Up and Dissolve
3
California Secretary of State. Nonprofit Certificate of Election to Wind Up and Dissolve and Nonprofit Certificate of Dissolution
4
California Legislative Information. California Code CORP 6713 – Distribution of Remaining Assets
5
California Attorney General’s Office. General Guide for Dissolving a California Nonprofit Corporation
6
California Legislative Information. California Code CORP 6716 – Disposition of Assets on Dissolution
7
State of California – Department of Justice – Office of the Attorney General. Dissolution of a Nonprofit Corporation
8
Franchise Tax Board. FTB Publication 1038
9
Franchise Tax Board. Corporations
10
Internal Revenue Service. Form 966 – Corporate Dissolution or Liquidation
11
Internal Revenue Service. Termination of an Exempt Organization
12
Internal Revenue Service. 2025 Instructions for Form 990