10 Reasons to Change Your Business Structure – Signs You Shouldn’t Ignore

Feeling like your current business structure isn’t working anymore? You’re not alone. Many business owners hit a point where their original structure doesn’t quite match where the business is heading. That’s okay—your company and your foundation might need to grow.

Time to Take a Fresh Look

Here are 10 signs that it might be time to review your business’s structure.

1. You’re Growing Fast: Should you hire more people or expand your operations? If your business has grown bigger or more complex, your current structure might be too limited. You may need something that supports more moving parts.
2. You’re Ready for Funding: Are you planning to raise money or bring on investors? Some structures are more appealing to potential backers. For example, corporations typically have more fundraising options than sole proprietors or partnerships.
3. You Want to Protect Yourself: As your business grows, so does the risk. Switching to a structure like an LLC or corporation can help protect your assets if something goes wrong.
4. You’re Adding Partners or Planning for the Future: Thinking about bringing in a business partner? Or maybe you’re considering retirement and need a succession plan. Changing your structure can help make ownership transitions smoother and more precise.
5. Tax Time Is Hurting: Are you feeling the sting come tax season? Different structures have different tax rules. For example, LLCs may offer pass-through taxation, while corporations face double taxation. A change might bring some relief.
6. You’re Expanding Across State Lines: If you’re expanding into new states—or even new countries—you’ll want a structure that can handle different legal and tax rules. The proper setup can make it easier to stay compliant.
7. Business Is Getting More Complicated: As your business evolves, you might need more structure around decisions and who’s responsible for what. Switching to a corporation, for instance, can help define roles and responsibilities more clearly.
8. You Want to Look More Professional: Sometimes, a structural change isn’t about legal or tax reasons—it’s about perception. Becoming an LLC or a corporation can increase your credibility with banks, vendors, and customers.
9. You’re Looking for Special Incentives: Certain business types qualify for government contracts or tax breaks. If you’re not eligible under your current setup, restructuring could help you unlock those perks.
10. You’re Building a Stronger Team: Are you thinking about offering employee ownership or stock options? You’ll need a more formal business setup, like a corporation with a plan for equity incentives, to support that.

Behind the Scenes: What You’ll Need to Consider

Changing your structure isn’t just about a new name on your paperwork. There are legal and tax details to think through, too:

• Forming (and possibly closing) entities: You’ll need to file new documents, dissolve your old setup if required, and follow your state’s rules.
• Liability protections: A new structure might give you stronger personal asset protection.
• Tax changes: LLCs pass income to members’ tax returns, while corporations file separately and may face double taxation.
• Contracts: You’ll want to review existing agreements to make sure they’re valid under the new structure.
• Employee policies: A more formal structure might require better recordkeeping, benefits handling, and compliance processes.
• Governance: Corporations need bylaws, a board of directors, and formal decision-making processes.
• Financing: The proper structure can open doors to new funding, but also means more financial reporting and oversight.
• Succession and estate planning: Making a change now could help you better plan for selling the business later on.

Ready to Make the Change?

Here’s a Quick Checklist.

1. Figure out why you want the change. (What’s the goal? More protection? Better taxes? New partners?)
2. Talk to experts. A good business advisor and tax professional can help you avoid costly mistakes.
3. Pick the proper structure. Match your goals with the options available.
4. Complete the paperwork. File everything needed with your state and pay any fees.
5. Update your contracts. Adjust any agreements and operational guides.
6. Let everyone know. Share the change with your team, partners, and vendors.
7. Update your finances. This includes bank accounts, credit lines, and financial records.
8. Stay compliant. Check local, state, and federal requirements and apply for new licenses.

Smoother Growth and Fewer Surprises

Changing your structure might sound like a lot, but it could set your business up for smoother growth and fewer surprises later.

Need help navigating the process?

That’s what we’re here for.

Let’s discuss what structure makes sense as you move your company forward.