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Bulletin Series: Structuring For Small Business Part 6 – Restructuring your Business

business restructuring

Restructuring your business
If your business has grown significantly since it was established or your personal circumstances have changed, it might be time for you to consider restructuring the legal ownership of your business.

The key drivers for a business restructure are generally the same factors you consider when choosing which entity to use when establishing your business.

Control
You may wish to introduce or exit business owners from the business, or change the structure of the business to allow for that in the future.

You may wish to restructure the business as part of your estate or succession planning or to introduce the next generation.

You may need to change the structure of your business to make it more attractive to a purchaser.

Risk
Has the risk profile of your business, or the personal assets you hold which are now exposed to that risk, grown?

Are you considering restructuring your business to protect your personal assets from the risks associated with the business?

Taxation
Are you looking to introduce greater flexibility into how the profits of the business are distributed to allow greater tax management?

Would you like to have the option of limiting the tax rate of your business to the corporate tax rate?

Does your current business structure allow you access to the available capital gains tax exemptions and rollovers on a sale of that business?

Restructure Implications
The transfer of interests in business owning entities and the transfer of business assets between entities can give rise to tax and stamp duty.

Many concessions, exemptions and rollovers are available to help you restructure.

Tax elections may be available to manage the tax implications of introducing or exiting a partner in a partnership.

Stamp duty exemptions may be available in relation to the transfer of business assets between family members.

Stamp duty and capital gains tax exemptions may be available in relation to the transfer of business assets between companies that are part of the same group.

Small business capital gains tax exemptions may be available in relation to the transfer of an interest in a small business.

Capital gains tax rollovers may be available for the following business restructures:

  • The transfer from an individual, partnership or trustee to a company, where the shares of the company are held by that individual, partnership or trustee.
  • The transfer from a unit trust to a company, where the unit holders hold all the shares in that company.
  • Interposing a company between an existing company and its shareholders.
  • The transfer between entities with the same ultimate ownership as part of a genuine restructure of a small business.

However, stamp duty may still be applicable for some of these restructures, so careful consideration is required.

If you have any questions about the current structure of your business or the potential restructure of your business, please contact our commercial team on 07 4671 6000.

To review Part 1 of this bulletin series, click here – Overview of Different Structure Types

To review Part 2 of this bulletin series, click here – Sole Trader

To review Part 3 of this bulletin series, click here – Partnership

To review Part 4 of this bulletin series, click here – Company 

To review Part 5 of this bulletin series, click here – Trust

If you would like a quick overview of all of these bulletins, please click here below to watch our video.