Restructuring for growth

Scenarios where you may consider changing your business structure

Restructuring should be considered every time the business goes through a significant change - this could be growth, raising new capital or taking on any risky endeavours such as a major purchase or product launch.

With regular examination, it shouldn’t be a matter of rebuilding the structure from the ground up every time there’s a change. Rather, it’s regular, incremental evolution in line with your business’s goals. Common scenarios where you might consider changing your business structure include:

1. Managing investments or cash

Once your business is up and running, you might suddenly find yourself with a trading company generating a good amount of cash.

The natural next step is to make this cash work for the business, for example by investing it in property or funds. However, taking it out of the business can incur tax liabilities. In this scenario, creating a new business entity to borrow the money from the trading company can give you more flexibility in how you deploy your capital.

2. If you wish to leave the business

If you want to move on from the business, whether for retirement or to start something new, restructuring can help with succession planning.

By creating new structures that give roles to existing people or that tie key assets to parts of the organisation you can effectively separate yourself from the business while ensuring stability in terms of talent and IP.

3. Selling the business

If you want to make your business more attractive for sale, restructuring can help.

For example, if you have buyers who are primarily interested in the name and IP of the business, but not in the premises, you can create a new company to retain the physical assets while selling the rest of the business.

Scenarios for reviewing your business structure

4. Preempting risk

Restructuring can be a good ‘just in case’ tactic in the event of the business taking on risk. This could be launching a new product, taking on a new partnership, raising debt or taking on a major contract.

If there is a chance of something going wrong in the business, restructuring can insulate the rest of the company.

5. Managing people and responsibilities

Business structures can be used to clarify responsibilities within a business and motivate your team to take ownership of their particular area.

Restructuring can also help with business reporting and accounting to separate products, services and management teams into separate entities rather than collating all the information in one place.

Restructuring can help manage mergers or new partners in your leadership by creating a limited liability partnership; instead of having to manage shares.

Find out more about Exit Planning here