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.
Read our top 5 tips for selecting the right 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 the key financial considerations to take into account in order to scale-up your business successfully.
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