For entrepreneurs who have limited experience and personal assets, it is often best to start small and grow from there. Scaling up operations as a brand develops a customer base is a practical means of limiting risk early within the lifecycle of a startup. This approach also allows an entrepreneur to retain sole control of their vision in ways that other approaches don’t.
As a result of these benefits, many people start their businesses as sole proprietorships or simple partnerships. After a few years of growth, they may start thinking about expanding their company. From moving into other markets to becoming a publicly traded organization, there are many ways for a business to grow when it proves successful. When this growth is set to occur, the owners and executives running the organization may need to consider restructuring the business to better meet the company’s evolving needs.
Liability protection and the potential for growth are valuable for bigger businesses
The more services a business provides or goods it delivers to customers, the more liability it has in the long run. Converting a small, successful business to a limited liability company (LLC) could be an important step for an entrepreneur ready to take their business to the next level.
An LLC provides those with an ownership interest with protection from personal liability and also offers tax benefits. It can also be a way for a single person or a group of owners to maintain close control of the company.
A larger, more complex corporation may be an option for a business on the precipice of explosive success. Those who want to offer people an option to buy stock in their organization or to reach national or international markets may need to convert their existing business to a more complex corporate structure.
The process of changing a business can be a challenge
Although it is possible and often beneficial to change the structure of a business, entrepreneurs may struggle to manage legal filings on their own. Official paperwork, as well as crucial internal documents, will need to be drafted.
Mistakes in the process can diminish the benefits of making a change, so many business owners will bring in professional help to handle the process of converting their business from one form to another or dissolving the existing organization and immediately forming a new one.
Discussing how you currently own and operate your business and your plans for the future can help you to choose a new business structure that better reflects the long-term needs of your organization than the simple structure that you may currently have in place.