If you’re considering changing the structure of your business or businesses to a group structure, you need to read on…
It’s important to understand all the pros and cons of creating a group of companies. This blog article explains all the areas you should consider before deciding which is the best structure for your organisation.
Let’s start with the pros…
- Taxes
A group structure can help with taxes. This may be helpful if certain businesses within the group aren’t making much money and therefore losses from one business can be used to lower the taxes of the more successful operations.
- Financial protection
Creating a group company structure does help to protect the businesses within it. For example, if one company is having financial difficulties, it won’t affect the others in the group.
- Asset protection
This format is also useful to protect your assets. If one company has legal or financial problems, the other companies’ assets remain safe.
- Operational efficiency
By operating as a group of companies, certain resources can be shared such as HR, IT, Finance and more.
Now let’s consider the cons…
- Complexity
A group structure can be complex! Managing multiple companies is more complicated than just managing one, so please bear this in mind.
- Cost
It can be costly to make this move… There are legal, administrative, accountancy and other costs that must be taken into consideration.
- Compliance
There’s also the matter of ensuring all companies adhere to all relevant rules and regulations.
- Transparency
Transparency can be an issue too. A group structure can make it hard for stakeholders to understand the group’s ‘overall’ performance.
- Funding and finance
Should one business require funding or finance, the performance of the group could affect the outcome. This could have a negative or positive impact on your chances to secure funds.
- Conflict of interest
It is common for groups to experience a conflict of interest within their businesses so it’s important to assess how this could affect your operations.
- Containing problems
In a group of companies, problems can spread! If one business is experiencing complications, it can affect other areas of the group too.
At Ellacott Morris we believe that a group structure can be the perfect strategy for the right business, but there are lots of questions to be asked ahead of making that decision. As experts when it comes to accounting for businesses of all shapes and sizes, we’re here to help you make an informed decision. Utilising our skilled team and our Xero accounting software, we can make the transition and management of your business accounts seamless and stress free.
With offices in St Osyth and Thorpe, we welcome you to make an appointment to discuss your current situation and plans for restructuring. Get in touch and let’s establish what’s best for you…
