The business structure implemented when you first started your business may no longer be suitable. Reviewing your business, and possibly restructuring, may result in substantial improvements in the current business environment. Further, if your business value is down due to COVID-19 circumstances, now may be an ideal time to implement changes for the better, which may include restructuring without incurring tax liabilities.
Like many business owners, you may have started as a small business, a sole trader or partnership using a simple structure to get your business off the ground. While busy in day to day business operations, you may not have stopped to consider your changed circumstances and future business goals. If your business has grown, the business environment has changed (perhaps as a result of COVID-19), you have introduced a new partner or are preparing your business for sale, it is vital to get the structure right. The wrong business structure could be causing you to miss out on a raft of benefits.
For example, succession planning may provide motivation for business restructuring as some structures are more appropriate for a smooth and efficient business exit.
There are specific structures that provide greater flexibility in relation to a range of business operations: financing, ease of entry and exit, business growth, ease of borrowing, and governance of legislation and regulations are among them.
Certain business structures separate personal assets from business activities held as a distinct entity. These arrangements may offer greater asset protection and less exposure to creditors.
Other structures may be more appropriate for non-family owned businesses or those with unrelated business partners. These structures may need to address separation of assets from the trading entity in addition to other governance requirements.
Certain business structures lend themselves to tax efficiencies. They may offer the capabilities to split income, make the most of tax concessions for specific activities and reduce your tax liability through paying company tax rates.
Some structures, finally, may offer greater flexibility for family businesses including the ability to vary distributions or transfer assets or control of the business more easily.
As you’ve read here, there are many reasons to consider business restructuring and because it’s complex, professional advice will always be critical. You will need help understanding technical issues, funding requirements, administration costs, tax implications and numerous other important matters relating to a business structure that will ultimately meet your business needs and goals.
Your next step
To discuss your options for restructuring your business or other matters concerning business recovery post COVID-19, please contact Rosenfeld Kant on (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au or elias@roskant.com.au
Partnering with you to deliver efficiencies, growth and success for your business.
The information (including taxation) contained within this article is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Rosenfeld Kant strongly suggest that no person should act specifically on the basis of the information in this document but should obtain appropriate professional advice based on their own personal circumstances.