Advivo Partner, Chris Morris, discusses reviewing your business structure and how to ensure it remains fit for purpose.
When starting a business, choosing the right business structure is a critical decision. The structure you select—be it a sole trader, partnership, company, or trust—shapes your legal obligations, tax liabilities, and the level of control you have over your business. Often, the chosen structure is the most appropriate for the business at its inception, however as your business grows and evolves, it’s important to regularly review this decision to ensure it continues to serve your needs effectively.
Why Your Business Structure Might Need to Change
Over time, businesses change in size, scope, and complexity. What worked initially might not be the best fit as your circumstances evolve. For example:
- Growth and Expansion: If your business grows significantly, a sole trader or partnership structure may no longer be sufficient. A company structure could provide better tax benefits, asset protection, and opportunities for raising capital.
- Risk Exposure: As your business takes on more risks, a more sophisticated structure, like a company or trust, may offer greater liability protection and security for your assets.
- Tax Efficiency: Changes in tax laws or your business’s financial situation could mean that your current structure is no longer the most tax-efficient option. For instance, switching from a sole trader to a company might provide more opportunities for tax planning and savings.
- Ownership Changes: If you bring on new partners or investors, or if you plan to pass on the business, restructuring might be necessary to accommodate these changes and ensure smooth transitions.
Regular Review is Key
We recommend regularly assessing your business structure, especially when significant changes occur, such as:
- A substantial increase in profits or revenue
- The introduction of new products or services
- Expansion into new markets or jurisdictions
- Changes in personal circumstances, such as marriage, divorce, or inheritance
By periodically reviewing your business structure, you can ensure it remains aligned with your goals and the evolving landscape of your business.
Seek Professional Advice
Reviewing and potentially restructuring your business is not a decision to be taken lightly. Engaging with experienced professionals is crucial and can help you navigate the complexities of Australian business laws and tax regulations, ensuring your structure remains optimal for your situation.
Conclusion
The business structure you start with is a foundation, but as your business evolves, that foundation may need reinforcement or reconfiguration. Regularly reviewing your structure is a proactive step in ensuring your business remains resilient, compliant, and poised for continued success in the dynamic Australian market. If you would like us to review your current business structure, we’d love to chat!