As you grow and scale your business, sometimes the structure it was created under can change. This can be due to a number of factors such as rapid growth. Change is inevitable but when it comes to your business structure, it’s important to be prepared to comply with legal obligations and make a smooth transition when necessary.
Not sure if you have the right business structure in place? Our team of experts will help you setup the best structure for your goals.
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Can I change my business structure?
Yes. Businesses change overtime and it is always important to adapt when you outgrow your current structure or revaluate your priorities to have a business structure that supports you.
It’s possible to transition to a different structure and we’re here to help you make the transition as smooth as possible.
How do I change my business structure?
When changing business structures, it’s important to note that your legal entity is changing.
You will need to register new details with the Australian Taxation Office (ATO) and sometimes the Australian Securities and Investments Commission (ASIC).
How to get started:
- Register a new ABN and TFN
- Open a new bank account for your new business structure
- Notify your customers, suppliers, and manufactures with your new bank details
- Update all invoices with the new ABN and bank details
- Sign all agreements and contracts under the new business entity
- File your tax return and business financials under the new structure
- If necessary, deregister your old business structure with the ASIC
- File your final tax return
- Notify the ATO that you’re no longer trading under this entity
- Update all contact details, collateral and assets with new ABN
Do I need to change my business structure?
It is not always necessary to change your business structure but there are a number of reasons you may choose to change structures.
If you are considering diversifying your business or expanding overseas, you may need to change structures.
A sole trader is introducing a new product and wants to use investors to fund the growth of the new product. The ability to allocate equity ownership to the investors is essential, but a sole trader structure doesn’t permit it.
Change of ownership
If you have new owners joining the business or new investors who want to contribute, you may need to change the business structure.
If you recently bought a business you may need to change your structure; or you are under a family trust structure who wants to bring on members who aren’t part of the family, you will need to change your business structure.
If you’re looking for increased tax efficiency within your current structure, you may need to consider a different business structure.
Utilising a private company structure will allow you to access the low tax rate and the utilisation of a family discretionary trust will allow you to manoeuvre money to different individuals and other legal entities. When individuals earn over $40,000 in taxable income, this becomes a good consideration.
Personal asset protection
If your business grows too rapidly, it increases the complexity and level of risk. Changing business structures can lower the risk that could directly impact the business owner.
When business owners acquire personal wealth and property, having the business ownership NOT in their own name and rather in the legal name of a company will protect them against potential legal action should something happen to the business. This protects the personal assets of the business owner. Also, splitting business and personal assets between ‘mum’s and dad’s’ can assist with an extra layer of protection.
Business Asset Protection
Separating and segregating tangible business assets from the risk of the business is important to safeguard the wealth of your business.
Holding and owning business Property, Plant and Equipment in a separate structure to the trading entity will ensure that should there be risk in the trading company; the business assets will be protected.
Superannuation can be used to protect both business and personal assets as well as to supplement tax mitigation.
A Self-Managed Super Fund can facilitate the growth of a business by enabling the business owner to lease their commercial property from their SMSF. This assists with tax mitigation, business asset protection and a diversified investment opportunity.
We are currently experiencing an economic downturn. Many businesses who are affected can benefit from changing their business structure to stay afloat. Need to make a change? Our team of experts will help you restructure your business to stay afloat during these trying times.
A company is needing to downsize in order to stay in business. A change in structure can be used to downsize and operate as a sole trader.
Important things to consider before changing business structure
Out with the old, in with the new. When changing your business structure, be sure to consider what you will do with the old structure. Are you going to cease to trade under it or continue to use the structure for other business purposes?
Changing your business structure at the start of a new financial year is a good way to start fresh from day one.
If you are looking to restructure your business during the financial year, it’s best to get it done sooner rather than later. This will allow you to maximize the returns on any tax efficiency’s immediately.
If you are changing owners of the business, be mindful that you may trigger a CGT event.
Remember to give your business time
It is important to remember that businesses are constantly changing so you need to stay on top of any structural changes that may be required.
We can help you keep your business on the right path
Could you benefit from changing your business structure? We can help you identify the ideal structure for your business with a free 60-minute strategy session. We can provide you with expert advice on the best business structure for your business, so you can keep moving in the right direction.