Many business owners choose a structure when they first commence trading and then continue operating under that structure for many years without revisiting whether it remains appropriate. However, business growth and changing circumstances can sometimes mean that the original structure no longer aligns with the way the business operates. A business structure affects matters such as taxation, registrations, reporting obligations, control of the business, administration and, depending on the structure, personal liability. While no single structure is universally best, circumstances can change sufficiently over time to justify a review.
A structure review may be worthwhile where a business has experienced changes such as:
increasing revenue or turnover;
employing staff for the first time;
bringing family members or additional owners into the business;
expanding into new products, services or markets; or
more complex compliance, reporting or administration requirements.
These developments don’t necessarily mean a restructure is required. However, they may indicate that the assumptions that supported the original structure should be revisited.
Clients often associate structure reviews with tax outcomes. While tax considerations are important, you may wish to remind clients that business structures also influence:
ownership and control arrangements;
A structure that appears attractive from a tax perspective may not always be the most appropriate choice once broader commercial and legal considerations are taken into account.
This topic may provide a useful opportunity to discuss whether a client's current structure still reflects the way the business operates today.
Questions that may help guide the conversation include:
Has the business grown significantly since it was established?
For many clients, the outcome of a review may simply be confirmation that their current structure remains suitable. However, others may benefit from exploring specialist tax, legal or financial advice to better understand the implications of their existing arrangements.
Restructures can involve taxation, legal and administrative consequences and must be considered in light of the client's specific circumstances. Nevertheless, periodic reviews can be valuable. Business owners regularly review pricing, staffing and operations as their businesses evolve. Reviewing the structure that underpins the business can be just as important in ensuring it continues to support long-term objectives.