The philosophy that drives nonprofit corporations is to effect positive change for educational, civil, religious, social or charitable causes. But for some not-for-profits, satisfying the original goals of the corporation becomes more and more challenging due to financial difficulties and other reasons.
If you’re evaluating whether your nonprofit should be dissolved, this article explains reasons why this may be the right decision and the organizational and legal steps you should take.
Reasons for dissolving nonprofit organizations
Can your non-profit support itself financially?
Are unpaid debts mounting with no end in sight? Are contributions virtually nil? If your nonprofit corporation has been sustained by a handful of contributions, it may be time to review other feasible financial options. If fundraising possibilities are slim, it may be time to consider corporate dissolution.
Is the competition fierce?
If you’re facing competitive forces such as several comparable not-for-profits in the same town doing the same thing, you may be vying for government funding and revenue for your cause while your competitors down the block are beating the same drum. If joining forces isn't a viable option, closing your doors and ceasing duplicate efforts may make sense.
Has your nonprofit organization's reputation been tainted?
Embezzling and mismanagement add up to disaster for a nonprofit corporation. While you might think something like this would never happen within your nonprofit, you’d be surprised how often it does. Public relations efforts can be stepped up to redeem the positive image your nonprofit entity once maintained. Some organizations successfully recover while others may continue a downward spiral making dissolution your best option.
Are you still helping your intended audience?
You may have originally formed your nonprofit corporation to help homeless individuals in your town. Now your local government has built numerous apartment buildings specifically to support these same individuals. Ideally, there are no individuals on the street anymore, but your not-for-profit's purpose may no longer be relevant. You may decide to repurpose your nonprofit corporation's mission or dissolve your corporation and start a new venture.