Changing the structure of a business is not uncommon, especially when things change and the present structure is no longer useful or satisfactory. For instance, if you started out as a sole trader and your business expanded so rapidly you decided to take on a partner to help with the work, or even to just provide more finance. You would then need to restructure the business to be a partnership.
But there are many other reasons why you may be considering restructuring and there are things to consider before going ahead.
- It’s important to seek legal advice from a suitable corporate lawyer and then be clear with your instructions about why you need to restructure so you can be sure that this is the best way forward and it will meet your future needs better than the present structure.
- Know your options and the implications of each one. There are tax and other implications with each type of business structure, so these must be taken into careful consideration to ensure the new structure is right for your goals.
- Having a business plan is an important part of any business. If you are restructuring, it’s like setting up a new business from the old, with new goals and aims. So it’s important to revise and renew your old business plan to take into account your new goals and objectives.
- Most businesses that have been restructured from an old one will need a new Australian Business Number (ABN) because they are, in effect, a new business.
- What about a new business name or logo? While this is not essential, if you do decide on a new name for your business, don’t forget it all has to be registered just like the first one was. Transferring the business name with ASIC must also be done.
- When new partners or stakeholders come into a business you must make sure they know all about the terms and conditions such as who makes the decisions, what percentage they will own, what they are liable and responsible for and so on.
- Are there other agreements in place that will need to be changed in some way, or that are no longer needed?
- Business structure affects tax obligations so you must be sure of what is going to change in this area.
- Find out what you need to transfer, for instance, you may need to transfer the business name to yourself and apply for a new ABN if you change the business structure from sole trader to partnership, but still want to run it as a sole trader.
While there is much information online, seeking help from an experienced lawyer is the best way to ensure you truly understand the implications of each change and that everything goes according to plan.