How to Merge Two Nonprofits

Decide Whether Merger Is the Right Tool

Boards typically consider a merger when two nonprofits serve overlapping missions, when one organization can no longer sustain itself independently but its programs are worth continuing, or when combining back-office costs would free up more money for mission work. A merger is different from a full dissolution: instead of winding up and distributing assets to an unrelated exempt organization, a merger folds one nonprofit's assets, contracts, staff and obligations directly into another, continuing entity. See our guide on how to dissolve a nonprofit if your board is weighing a straightforward wind-down instead.

Get Board, and Member, Approval on Both Sides

Each nonprofit's board adopts a resolution approving the plan of merger, and if either organization has voting members separate from its board, most state nonprofit corporation statutes also require a member vote at whatever threshold the bylaws or state law sets. Document both votes carefully in meeting minutes; the state filing and the IRS reporting that follow both reference this authorization.

Draft and Sign a Plan of Merger

The plan of merger is a written agreement naming which organization survives, describing how the other's assets, debts and obligations transfer, and addressing what happens to each organization's officers, directors, employment agreements and existing grant or donor restrictions. It's typically executed by each corporation's chairperson, president or vice president, along with its secretary or assistant secretary.

File With the State, and Notify the Attorney General If Your State Requires It

After both corporations approve the plan, file a certificate or articles of merger with the state (or states, if the two organizations are incorporated in different ones), along with that state's fee. Several states also require advance notice to, or consent from, the Attorney General before a charitable merger closes. California, for example, requires a public benefit corporation to give the Attorney General at least 20 days' written notice before merging with another public benefit corporation, a religious corporation, or a similarly charitable organization, and requires the Attorney General's prior written consent for a merger with any other type of entity, per the California Corporations Code. Confirm whether your own state of incorporation imposes a similar requirement before you schedule the closing.

What Happens to Each Organization's 501(c)(3) Status

If one of the two original corporations survives the merger and simply absorbs the other, the surviving corporation generally continues operating under its own existing 501(c)(3) determination letter; it doesn't need a new one just because it merged with another exempt organization. If instead the transaction forms an entirely new corporation, that new entity is a new legal person in the IRS's eyes and has to file its own Form 1023 or Form 1023-EZ application for recognition of exemption; it cannot use either predecessor's determination letter, and it is not automatically tax-exempt just because both predecessors were.

What Happens to the EIN

The same distinction applies to Employer Identification Numbers. Per IRS guidance on when a new EIN is required, a corporation that is the surviving entity after a merger keeps its existing EIN. A new EIN is required only when the merger creates a brand-new corporation rather than continuing an existing one. Whichever organization does not survive the merger stops using its own EIN going forward, since it no longer exists as a separate legal entity.

Report the Merger to the IRS on Form 990 Schedule N

An organization that merges, liquidates, terminates, or disposes of more than 25% of its net assets during its tax year generally completes Schedule N of Form 990 or 990-EZ for that year, describing the assets transferred, their value, and the name and EIN of the organization that received them, per the IRS. This applies to the organization that does not survive the merger, reporting its own transfer of assets into the surviving entity.

Due Diligence Before You Sign Anything

Before finalizing a plan of merger, each board should review the other organization's finances, contracts, leases, employment obligations, outstanding grants, and any donor restrictions on its funds. A merger inherits these obligations along with the assets; discovering a significant liability after the merger closes is far harder to unwind than catching it during due diligence.

After the Merger Closes

Once the state has filed the merger documents, update the surviving organization's bank accounts, insurance, payroll and vendor records to reflect any name or structural changes, and notify major grantmakers and donors of the combined organization's new scope. Keep the plan of merger, both boards' approving resolutions, and the state filing permanently with your corporate records, since banks and funders can ask for proof of the transaction years later.

A Letter of Intent Isn't a Plan of Merger

Many nonprofit mergers start with a nonbinding letter of intent while both boards study the idea, but that document doesn't replace the formal plan of merger that each board (and members, if applicable) must separately approve before the transaction can be filed with the state. Keep the two documents, and their different legal weight, clearly distinct in your board's discussions.

Donor-Restricted Funds Follow the Assets, Not the Paperwork

If the non-surviving organization holds grant funds or donations restricted to a specific program or purpose, those restrictions generally travel with the assets into the surviving organization. Confirm with major funders, before the merger closes, that the restricted purpose can still be honored by the combined organization, rather than assuming the merger agreement alone settles the question.

Staff and Program Continuity Take Real Planning

Employment agreements, benefits plans, and program-level relationships with clients or partner organizations don't merge automatically just because the corporations do. Plan the practical transition, separately from the legal filing, with enough lead time that staff and the people your programs serve aren't caught off guard.

This Is Not Legal or Tax Advice

Whether your specific state requires Attorney General notice or consent, how to structure a plan of merger that protects both organizations' donors and obligations, and whether your transaction creates a new corporation or continues an existing one for EIN and tax-exemption purposes are fact-specific questions. Talk to a nonprofit attorney and a tax professional before signing a plan of merger.