2 incorporated nonprofits want to merge. Both do NOT have 501(c)3 status yet. Is it possible?

No. You can't have it both ways. It is possible to keep separate financial records and then consolidate them at the end of the year in order to produce a single tax return. However, once you merge there is only one entity. All of the directors and officers owe their fiduciary duty to that single entity. They cannot remain loyal to only half the entity. They cannot keep secrets from the other half of the entity. That means that if a majority of the directors did not want to allow half the entity to "pull out," they could prevent such a pull-out. It might even be argued that the directors who stated a loyalty to either of the former entities would be barred from voting. This might mean that ONLY directors who opposed the pull-out would even be entitled to vote. Two entities can share office space, share staff, share web access and phones, in order to save money, and still exist as separate entities, with separate decision making boards and officers, and tax returns. This way the directors and employees of each group could remain loyal to their own group, and without assuming loyalty to the other. Whenever a conflict arises, directors and employees must decide which entity they will be loyal to and resign and not take any action or vote on behalf of the other entity. Staying separate avoids that problem.  We charge $300.00 per hour plus expenses, bill monthly and expect bills to be paid promptly. I would expect that such an arrangement could be negotiated and drafted for not more than $2000.00. I would represent one side or the other, but the other side could agree to reimburse the side I represent for half of those fees, and the side I represent could instruct me that my assignment was to make the agreement as fair and even to both sides, as possible. If you would like help negotiating an agreement for such a "sharing" arrangement, please call me.  Dana Sack 510-286-2200