Why business structure is vital for growth

The strength of Australia’s economy is due to its small and medium businesses.

In fact, there are more than two million of them in Australia, who collectively employ a huge number of people.

So, clearly, their importance to the overall health of our national economy cannot be overstated.

However, one of the issues that small businesses usually have is ensuring their structure allows them to grow when the time is right.

Growth go-slow

I recently helped Jonathan, a client who had concerns that his business structure was not optimal for growth and expansion.

Jonathan had worked hard to grow a long-standing business but had hit a brick wall when he tried to expand to make the most of increasing sales demand from customers.

His initial business structure had been implemented without much expert guidance, which is why he came to Metropole Wealth Advisory for advice.

Other major problems that Jonathan had included:

• No asset protection
• Less than ideal tax management processes and
• An inefficient use of funds for investing.

He was also worried about taxation implications if he was to sell his business in the future.

In short, Jonathan was a good position for future growth, but was a little hamstrung on how to get there.

Structure solution

My initial discussions with Jonathan identified his current position as well as his future requirements.

I immediately recommended a solution that involved restructuring the business entity to a more appropriate structure.

Importantly, that structure did not trigger any taxation events such as Capital Gains Tax or stamp duty.

Also, by implementing a new structure, it meant that if Jonathan was to sell the business in the future, he would have a reduced taxation implication.

The new entity also served to reduce his tax on earnings as well as providing for asset protection, too.

In turn, it also meant that Jonathan had a substantial increase in his cash flow that he could use to invest in wealth creation.

Lessons learned

By restructuring Jonathan’s business structure, he went from having a business that was struggling to grow to one that was quickly flourishing.

The hours he lost struggling to work out why he business wasn’t growing as it should, were now his to allow him to concentrate on more positive things like improving his cash flow.

Many ordinary Australians run small business ownership as one of the keys to achieving their financial success, but it does take dedication and perseverance to get there.

However, having an ineffective business ownership structure to makes the road to success rockier than it ever needs to be.

Small and medium business owners would be wise to think ahead early and work with multi-disciplined professionals from the outset.

This includes ensuring that their businesses are structured for the long-term and for growth, to help them create a more successful financial future.

What can you do about this?

If you’re looking for independent expert advice about you your financial circumstances why not allow Ken Raiss to provide you with a Strategic Wealth Plan?

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• Minimise Your Tax
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• Manage Your Risk
• Create Your Legacy

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Disclaimer

This article is general information only and is intended as educational material. Metropole Wealth Advisory nor its associated or related entitles, directors, officers or employees intend this material to be advice either actual or implied. You should not act on any of the above without first seeking specific advice taking into account your circumstances and objectives.