When we considered doing it, all of the advice I was given basically stated to spend the first year (or less depending on the size of your bank account) running both a PTA and a PTO. Get the PTO bylaws written and approved, elect a board, open up bank accounts, etc. Use the PTA to pay all bills, purchase all items, etc., but do all fundraisers and any other income (other than PTA membership dues) through the PTO. Once you have enough money in the PTO account, get your 501(c)(3) status and incorporate (if you're going to do that). Also be sure that at least one of the two has insurance, so that you are covered on liability for any activities that you do. Again, this will probably be the PTA, since the state bylaws require it (And keep in mind that your PTA insurance won't cover you on anything that your PTO does independently, such as its financials, so you may want to go ahead and get insurance on both of them). We were advised that once all of the accounts were drained, we needed to transfer any assets that were noted on our audits (like scrip, popcorn machine, etc.) to the new PTO as a donation from our PTA, but only after the PTO had its 501(c)(3) status.
Once the money was all spent and the transfers made, we would then notify the state PTA (and regional PTA council if you are a member of one) of our intent to dissolve effective on "x" date (check the state bylaws to see if they have a requirement on how much notice you are required to give them), jump through any hoops that they required us to jump through, and then once "x" date arrived we would close our books out, get them audited, notify the IRS and the state dept of justice (that's who handles our incorporated status, this may be different in your state) of the dissolution of the PTA, file our final tax returns and submit copies of all of it to the state PTA as soon as it was complete, along with obtaining insurance for the PTO if we hadn't already done so.
The reason for all of this is that some (all?) state PTA's have bylaws that state that when you dissolve they can seize all of your funds.
We were also warned that some state PTAs will indeed require you to jump through hoops, such as allowing a PTA representative to come speak to your group and try to convince them not to make the change, insisting on a full audit of ALL of your books going back varying numbers of years depending on the state, insisting on copies of bank records verifying that you didn't use any PTA funds for the start up or activities of the PTO, etc.
When we looked into it we figured that it would take us at least 1 full school year to make the switch completely. The nice thing for us about doing it that way is that we have nearly enough in our savings and checking accounts to cover a year's worth of expenses, so by running the fundraisers through the PTO, it would have allowed our new group to start out with a comfortable amount in both the savings account and in the general fund for its first year running on its own. I don't know how many other PTAs are in that same situation, so that may not apply to everyone.
Ultimately we decided against making the change not because it was too difficult and complex, but because there were things that we liked about the PTA setup that we weren't willing to give up in the changeover. It's such a personal decision based on the individual parent group, and it isn't always wrong for everyone, but it wasn't the right way to go for us.
Whatever you decide to do, good luck!
~Lisa
