When beginning a new business, many entrepreneurs start with sole trader status. As your business grows, it may become necessary to change structures. Similarly, when purchasing a business, you may identify that the structure is not ideal and seek to make a change. There are many things to think about when it comes to changing your business structure.

Why would you change your business structure?

If you’re about to undertake a change in your business structure, it’s important to be clear about the reasons you’re doing this. The resulting changes may have implications from a legal or tax perspective, and may also affect your personal liability.

One of the more common reasons for a business to change structure is when it’s growing – especially changing from sole trader to company, or to take on a partner. If you’re expanding overseas or into new areas, changing the structure of your business may make things easier or more streamlined.

A company can protect an individual’s personal liability. It can also employ people and own assets. It’s a separate legal entity.

Another reason you may change the business structure is to positively impact cash flow or profitability. Adopting a new structure may help achieve financial goals.

If you’re looking to simplify your business structure, you may actually downsize (for example from a company to a sole trader entity).

There are four key business structures in Australia:

  • Sole Trader
  • Partnership
  • Company
  • Trust

Pros and cons

As with most choices in life, there are pros and cons for changing the structure of your business. Here are few of the primary considerations.

Creating a new business structure may require a new business plan. It may also require you to communicate with other stakeholders about the change. You may need a new Australian Business Number, business name and/or trademarks.

New structures may mean a shift in responsibilities, liabilities, decision-making processes and ways the business operates.

On the upside, a new structure may better suit the current stage of your business’ growth, your team structure, operations and goals. It may protect your personal liability and assets, and provide peace of mind. It may also provide a beneficial result in terms of your tax outcomes.

How to do it

Business.gov.au has some great resources and information on changing your business structure. Of course, the main thing we suggest doing is first speaking with your accountant about your thoughts so they can present some scenarios for your consideration.

Involve your accountant at each step, they can help you make informed decisions. We also suggest getting legal advice to ensure you cross every ‘t’ and dot every ‘i’ as required.

How can QCA help?

If you’re considering changing your business structure, get in touch. Have a chat with us about your business goals and how you are thinking about changing and we can offer some informed suggestions.

Similarly, if you’re already on the road and have met with something you’re not sure about, get in touch and we can talk it through.

Contact our team of professionals on 07 5593 6060 – we are here to help you.