What Is Corporate Restructuring?
Corporate restructuring involves examining the current legal structure of a company to identify the need for potential changes.
The reasons for change are many, such as risk management, succession planning, and achieving tax efficiencies. Corporate restructuring is not something that can be done on a cookie-cutter basis. It should consider the current owners, future potential owners, the operating environment and resulting potential liabilities, and the ongoing cost of maintaining the proposed structure.
This is an exercise that takes time and effort to understand the needs of yourself, your business, and your goals. Once this is done, then alternatives need to be developed, analyzed, and discussed. Once that is done, then the plan is implemented.
Corporate restructuring is not only for large companies. Many small to mid-sized businesses can also benefit from considering restructuring.
A common example of corporate structuring is to hold major assets such as real estate in one company and the operations in another. There are a number of reasons for this separation. Some examples are to separate the liability of the operations from this major asset. It can make succession easier, as the cost to buy the business is small and the ongoing cash flow from the rental can form part of the retirement income of the former owner(s).
At KMA Chartered Professional Accountants Ltd. Our team will work with you to examine your current structure and see if changes are warranted. As part of any restructuring, we always consider, do the benefits of this exercise outweigh the cost.