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Scale-up Guide: Top 5 tips for selecting the right ownership structure to scale

Having the right ownership structure is essential in enabling your business to scale effectively. In contrast, the wrong structure could hamper growth, deter investors, create tax inefficiencies and prevent you from realising your objectives.

Last updated: 23 July 2020

To read an overview of other ways to effectively grow your business, download our Scale-up Guide here.

Read our top 5 tips for selecting the right ownership structure:

1. Consider having different companies to form a ‘group’

If you have different risk profiles for different revenue lines in your business, you could form different companies to ‘house’ the various business streams. Benefits include potentially limiting liability for shareholders and making it easier for you to divest parts of your business.

2. Do not make structures unnecessarily complicated

Complexity in corporate and group structures can add additional cost and be confusing. Examples include complex and differing ownership holdings for parts of the group, minority interests and different intermediate holding companies. Such complexities can cause unnecessary risk and deter potential investors. Simplicity is best unless there are genuine commercial or legal reasons for having a more complex structural arrangement for your business.

3. Play the long game

Consider your objectives for the business and plan accordingly. Make sure that anything you decide will help you achieve your long-term business aims, whether geographical expansion or attracting the right investor.

4. Make the structure work for investors

If scaling is likely to require new external investors, consider what ownership structure might work best for them. For example, most institutional investors will want to have a share in the whole business rather than having different parts owned by other parties, which could reduce control and increase risk.

5. Take professional advice on international expansion

Setting up abroad can be complex. Different countries will have their own unique laws on tax and other compliance issues. As a foreign owner, it will be important to get advice to make sure you are using the most appropriate structures and complying with following local legal requirements.

Download our Scale-up Guide: innovative financial advice to help you grow

We have created the Scale-up Guide, a practical guide that covers 20 topics on a wide range of financial advice. Download the guide to sense check and develop your understanding of key considerations to take into account on your growth journey.

Click here to sign up to our scale-up mailing list. Alternatively, if you have a query about any of the topics in this article, get in touch below through the enquiry form.

About the author

Simon Wax

+44 (0)20 7556 1231

Click here to sign up to our scale-up mailing list. Alternatively, if you have a query about any of the topics in this article, get in touch below through the enquiry form.

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