Small to Medium Enterprises (SMEs) can take many forms; some are better suited to your needs than others. In an ideal world, the best operating entity structure for your business will be put in place before you’ve made your first dollar, but I think we can all agree that such an outcome is highly improbable.. The best thing a new business owner (or prospective business owner) can do, is to seek the advice of a skilful accountant to attain tailored advice on the entity structure that best suits their needs at the time, given their particular set of circumstances. Bearing in mind, of course, that the structure that suits you best today may not be the best structure in 5 or 10 years’ time. Restructuring is a thing for good reason!

In some circumstances, a simple sole proprietorship may be sufficient (where you operate under your personal name), whilst others may call for a company. Still, others may require the shares in your company to be held by a trust for ease of distributing the proceeds of your business in the most tax-effective manner… perhaps you’d have a corporate trustee for that trust. Maybe you’d have multiple companies, with one owning the operating assets, one trading the operating business, and one employing your staff… You could have another entity owning the goodwill or any trademarks you’ve developed… and all of those can be held by multiple entities and trusts. You can add to this the potential of partnerships of individuals, partnerships of trusts, partnerships of companies, and we haven’t even talked about unit trusts yet… it gets complicated pretty quickly. And each layer adds complexity and compliance costs.

Quite simply, the structure that is suitable for you is not necessarily suitable for someone else or for another business, and often structures evolve, and not necessarily in an orderly or even appropriate manner. So, restructuring your business, whilst sometimes an expensive exercise (when you factor in potential capital gains tax issues, advice, and compliance costs), it can be much more costly to do nothing. For example, suppose your business has been happily trading in a trust or company for some time, and you are looking to sell in a little over three years. In that case, it is probably a good idea to talk to your accountant to see whether you need to restructure your business now to avail yourself of potential capital gains tax concessions, that could save you anywhere up to $1 million in tax on the sale of the business. It really is worth a discussion with your accountant… Accountants are often under-utilised, with their services limited to helping businesses stay compliant and deal with emergencies. But they are capable of so much more if you simply avail yourself of their strategic and tax planning skill set.

And when it comes time to value those businesses, entities, or shares so that the restructures are tax compliant, we will be there to help you and your accountant. We can help make the complex as simple as possible and arm you with the best information to make the best decision that suits you and your business.