Don’t assume the bigger organisation’s entity is the best. There are a whole lot of factors to consider. Broadly speaking the options are:
- Merge A into B
- Merge B into A
- Create C
When choosing between entities, consider these 7 factors:
- Tax status – what type of tax concessions do the organisations have; can the organisations be combined without losing tax concessions; where each has a different tax status (for example one may be a Public Benevolent Institution and the other many not) is there merit in keeping both organisations alive?
- Type of entity – for example, if the bigger organisation is an incorporated association, is it time to consider company status? If the smaller organisation is a company, it might make sense to transfer assets and liabilities into the smaller organisation. Alternatively, the big organisation could change its entity type.
- Governing document – if one organisation’s constitution is up to date and the other’s is an historical mess, you might prefer to use the organisation with the up to date constitution to avoid having to update the other one
- Perception – would it be significantly easier to sell the proposal to members if one entity rather than the other (or a new one) is adopted as the formal legal vehicle
- Licences – does one of the entities have a licence of some sort that is best left in place rather than losing it by deregistering the entity?
- Skeletons – if there are concerns about unknown liabilities arising in the future out of one of the entities, that could be a good one to deregister
- Bequests – is it important to keep a particular entity and its name alive for the sake of existing or future bequests?