Imagine a business owner like Steph, who started with one business and a small team. Now she’s planning to expand into new markets and wants key employees to share in the business’s future. The structure that worked at the start may not support both plans. Before she makes commitments, it’s worth stepping back and working out what the business needs next.
When you’re growing a business, the structure you set up at the beginning may not be the one you need for what comes next.
That becomes clear when you’re expanding into new markets, bringing businesses together or thinking about giving employees a stake in the company. Each decision has commercial and tax implications. Getting the structure right can help you put those plans into action.
I’ve spent decades advising business owners and building businesses myself. The best time to review your structure is when you have a clear goal in mind and enough time to plan for it.
Start with your business growth plan
Are you entering new markets? Do you have multiple businesses that could sit within one group? Do you want employees to share in the value they help create? The answers shape the advice.
A structure for international expansion may look different from one designed to issue shares to employees. The work is to connect the business goal with a structure that supports it, then plan the tax and practical steps needed to get there.
Bringing businesses together ahead of expansion
An Australian-based fashion brand was preparing for global expansion. It had two operating businesses. We brought them under a single parent structure as part of preparing the group for its next stage.
The work involved looking beyond the existing entities and asking how the businesses should sit together as the brand expanded. We worked through the ownership and operating structure, considered the tax implications of bringing the businesses under one parent, then implemented the group structure.
That gave the owners one group structure to work from as they pursued global expansion. The restructure was built around the commercial plan, rather than treated as a standalone tax exercise.
For a business entering new markets, it’s worth considering how future operations may fit into the group before commitments are made. Early structuring advice gives owners a chance to think through the options and make deliberate decisions as the business expands.
Creating a structure that can support employee equity
A thriving, privately held Australian managed IT business is entering a growth phase. Its businesses are held through family trusts. The proposed restructure is to move those businesses into companies, with two objectives: to review the tax position and create a company structure that can support issuing shares to employees.
That takes more than setting up a company and deciding how many shares to offer. The owners need to decide which company employees might hold shares in, what those shares represent and how the arrangement fits with the business’s plans. They also need to consider how the scheme will work if an employee leaves or ownership changes.
The tax treatment matters too. A company may qualify for the 25% base rate entity tax rate, subject to eligibility. Many base rate entities are small businesses, but an investment company may qualify only if it also meets the relevant tests. The owners also need to consider how profits will be used and distributed . Those choices affect the business and its shareholders, so they need to be part of the design from the outset.
This restructuring work connects the ownership model with the employee equity plan. That gives the business a corporate framework to work from as it grows and considers how employees can participate in its future.
How do you put a business restructure into action?
A business restructure is a sequence of decisions, not just a new entity on a chart. The work starts with understanding the current group and the owners’ plans. From there, we can compare options, consider the tax implications and work out what needs to change.
Implementation may involve establishing entities, transferring business activities or assets, updating ownership records and coordinating legal documents. The accounting and reporting arrangements also need to match the new structure.
Bringing tax advice in early gives you time to work through the options before expansion or an employee share offer is imminent. Starting with the goal helps make sure the structure and implementation plan support what the business is trying to achieve.
Is your business ready for what’s next?
If you’re planning to expand, bring businesses together or offer employees equity, take a fresh look at your structure. The right advice can help you understand your options and put the business in a better position to pursue its growth plans.
Talk to BlueRock’s tax and business advisors about business restructuring for growth. Get in touch via the form below.
Disclaimer: The content is intended as general information/advice only and should not be considered as advice on any matter and should not be relied upon as such. This has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information in regard to these factors before acting or seek advice before making any financial decisions. Any scenarios mentioned are fictional and for illustrative purposes only.
