When you have an organization type that is no longer relevant, you can remove or "close" the organization type which will disallow any existing or future organization to register under that type, while keeping your historical data in tact. Here are the instructions on how to do so.
Click Manage from your Switchboard to go to your Action Center. Click on your administrative branch, and scroll down to the branch tools.
Select Organization Types and click on the organization type you'd like to remove. Click the big, red Close Organization Type button in the top right hand corner. Note: Closing an organization type will prevent it from being assigned to new categories and existing organizations will not be able to re-register until a new type is assigned.