There are many reasons your business structure can change, hiring new employees and offering new services among them.
When you started your company, you chose so many things: a name, a location, perhaps a partner. Some of the start-up tasks we do as business owners are one-time tasks, others need revisiting as our company progresses.
Changing the structure of your business is one of those things that should be routinely examined, as it can save you money. A company’s need to change its structure is a sign that the company is evolving — for better or worse. Either way, the more specific the structure to its circumstances, the better. But business owners shouldn’t be in a such a rush to alter the structure of their companies that they don’t consult with an experienced accountant and carefully consider possible scenarios.
The four basic business types are sole proprietorships, partnerships, limited liability companies (LLCs) and corporations.
Reasons for changing your company structure can include:
· Hiring employees
· Hiring more employees
· Offering new services or products
· Bringing on a partner
· Low profits
· A need for more liability protection to protect personal assets
· Desire to save time with a simpler structure
· Seeking financing
· Taking on investors
Your accountant can help you navigate how to access forms you’ll need to fill out for the state, depending on your company’s current and desired category. Once filed, the state will notify you that your company’s business structure change was approved.
Those are the basics, but there are of course other tasks dependent on what kind of change you’ve made. A formal operating agreement with ownership, rights and responsibilities may be needed if you are becoming an LLC, for example. To become a corporation means choosing officers, a board of directors and shareholders’ agreement. If the IRS asks for any of these documents, they need to be in place.