What You Need to Know About Changing Your Business Structure

men shaking hands after signing documentsAs a business becomes more successful and grows, among the first things that require changing is the business structure, such as when a sole trader wants to register a company or have business partners. Restructuring a business is reorganising a business. It’s most commonly done to adapt the ever-changing requirements of a business, to improve business processes, and to make more profit. Changing a business structure might likewise involve adding partners, changing ownership, or changing various business aspects, like operational or legal aspects. 

Planning for a Business Restructure

The growth of any business would lead to impactful changes in the operations of a business, which means that a business would need to have the right structure to operate under the confines of the law. For example, it’s common for sole traders to restructure to a company structure or partnership. When planning on changing your business structure, however, one of the top commercial lawyers in Townsville advises that you take into careful consideration the following things:

  • Do you need to change your business structure and why?
  • Which type of structure would be most appropriate for your requirements?
  • Would you need a new trademark or business name?
  • Do you have to get a new Australian Business Number or ABN?
  • Which relevant individuals or entities do you have to inform about your restructuring (clients, regulatory bodies, insurers, and vendors among others)?

It’s also critical to note that since changing structures would result in significant effects on your business operations, you need to plan for it thoroughly. Planning should ideally involve key individuals including your lawyer, accountant, and financial adviser, etc. Don’t forget to include your employees when planning since this would affect how your business is managed and operated.

Restructuring could provide long-term benefits such as maximised asset protection and minimised ongoing costs, legal liability, and tax requirements. Likewise, if your business is experiencing substantial value growth, like the development of goodwill and intellectual property or value of your assets, selecting the right structure for restructuring is vital to help make sure that your business is protected against potential risks.

The Prime Takeaway

As your small business continues to grow, you have to do all that you can to effectively manage your growth as these would result in significant changes that would have a significant effect on your tax requirements and business structure. Do note though that restructuring won’t be easy, so you need to have a solid plan in place and help from the right people. But for sustained and maximum growth, and to make sure that your business operates at its peak, restructuring might be the best recourse for you.