As a business owner, you may find that your company’s needs and goals change over time, which can lead you to consider changing your business structure. The structure you choose can have significant implications for your company’s liability, taxes, and ability to raise capital. Here are five clues that it may be time to change your business structure:
#1: Your Business has Experienced Growth
If your business has grown significantly, your current business structure may no longer be suitable for your needs. A sole proprietorship may suffice when you’re starting out, but as your business expands, you may want to consider an LLC or corporation to provide greater protection for your personal assets.
#2: You Want to Limit Your Personal Liability
Incorporating can help protect your personal assets from business liabilities. If you’re currently operating as a sole proprietorship, changing to an LLC or corporation can help limit your personal liability in case of legal issues or debts that arise in your business.
#3: You Want to Attract Investors
Changing your business structure may be necessary to raise capital for your business. For example, if you want to issue shares of stock, you will need to be structured as a corporation. Incorporating also gives your business more credibility with investors and may help attract larger sums of investment capital.
#4: You Want to Reduce Your Tax Burden
Your business structure can have significant implications for your tax burden. If you’re currently structured as a sole proprietorship, you may be paying more in self-employment taxes than you would if you were structured as an LLC or corporation. Changing your business structure may help you save on taxes and keep more money in your business.
#5: Your Personal Circumstances Have Changed
Your personal circumstances can also influence the structure of your business. For example, if you get married or have children, you may want to consider changing your business structure to protect your family’s assets. Similarly, if you plan to retire or sell your business, you may want to change your structure to make the transition easier.
Working with Haworth & Company
Changing your business structure is an important decision that should be carefully considered. It is important to take a careful look not only at where your business is at currently, but also where you want it to be in the next several years. At Haworth & Company, our expert team helps small business owners in the Twin Cities to measure the pros and cons, to think strategically, and to plan for the long-term. If any of the above circumstances apply to you and your business, contact us today for help in making the right decision.