Is your business structure working against you?
Have you outgrown your business structure? Unfortunately many business owners don’t realise that their business has outgrown its structure until something comes up – and often this ‘something’ is negative.
Are your assets at risk?
Legal action by employees, customers and suppliers, and marital property settlements are the primary risk issues for many business operators. If you are operating as a sole trader; a partner in a partnership; or hold all business assets in a single entity, your structure may not provide sufficient asset protection. If any personal assets or valuable assets of the business are held in the same entity which carries on the trading operations of the business, those assets may be at risk. To protect your assets it is generally preferable to separate as many valuable assets as possible from the trading operations. Please contact us if you are not sure, or would like your structure reviewed.
Things to Consider:
Can you introduce new business partners or investors?
Wanting to provide key employees / investors with an equity interest in your business? Your current business structure may not allow for this.
Reinvesting in growth:
Expecting a strong growth path? Reinvesting profits in your business can be important in facilitating this growth, however some business structures don’t readily enable profits being retained by the business.
Can you take money out of the business?
When you first established your business, it’s hard to know what your profits are going to be and often initially there are a few lean years. In addition personal circumstances change – marriage, children, a spouse, etc. These changes can drive the need for discussions around the structure of your business.
Impeding international expansion
If you are contemplating expanding overseas this can significantly increase the complexity of your operations (eg additional Australian tax rules; and legal and regulatory requirements in the foreign jurisdiction). On top of the added complexity, control may also become an issue. The right business structure can limit your exposure to risk.
Access to tax incentives and concessions
Research & Development (R&D) concessions are only available to companies. If you have a significant level of R&D activity that could potentially qualify for the tax incentives, it’s worth exploring your options if you are not already in a company structure.
Can you exit your business?
The business lifecycle has shortened considerably with less business owners seeking to create empires. The wrong structure will limit your ability to sell your business interests, and may have a dramatic and detrimental impact on the amount of tax you pay on the sale proceeds. It’s important that you explore this issue well before you actually plan to sell or reduce your stake in the business.