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Do I need to change the structure of my business?

On Behalf of | Jun 8, 2022 | Business Law

Starting a business can be an exciting time. Often, in the rush of getting your company going, you may not take the time to understand the available types of entities fully. There are also times when you may sense that your business is going through growing pains.

As your company grows and changes, you may find that the entity you chose when you started is no longer fitting the needs of your business. Typically, this can be a matter of making a few simple changes to address your company’s changing needs.

These are some of the signs that you may want to change your business structure.

Protection from liabilities

In the beginning, you may have had your personal finances so intertwined with your business that you were not concerned with protecting your personal assets. After all, everything you had was getting put into the business.

As the divide becomes more evident between your company’s expenses and your personal finances, it may be time to change what type of entity you are using. Shifting to an entity that creates separation between you and your business can help you protect your assets if something goes wrong with your business.

Seeing investors

Initially, establishing your company as an LLC or a partnership may be precisely what you need. As your business grows, you can use your profits to invest in your business.

However, there may come a time when your company is ready to grow, but you do not have the capital to make the changes that your business needs. When it is time to start looking for investors, you may want to consider changing to a C Corporation since that can allow investors to contribute to the business without facing some of the tax liabilities that come with other entities.

Deciding how your chosen entity should shift with your growing business is an important decision. It is essential to get advice from a knowledgeable professional as you make your considerations.