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make sure to do it in the offseason.
league structre under league settings. edit the structure, remove a team. you can move teams around, rename divisions, remove/add divisions, etc.
the history does remain for any organization you remove. it is not deleted from the game, only your league's current structure. player stats, organization stats, your league history is all intact and properly accounted for.
i believe the players automatically hit the FA market, so if you want to do a draft or something with 'only' those players, you might want to shortlist the organizations you delete, first. otherwise, it'll be a 'FA' draft which dumps everyone into it... and possibly the next year's draft too (at one time that's how it worked, not sure if they ever fixed that... if beginning of a real world league, then you end up with the first 3-4 years of real amatuers too)
*** as the note on that screen says, make sure to regenerate the schedule after removing or adding any teams.
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