What is the reason for changing a business structure?

There are many reasons for changing how a business operates which may include changing relationships between business and customers.

As online trading grows exponentially, businesses are also pursuing new economic activities in virtual markets.

Reasons for change could include:

Innovative technology

The identification of new cloud-based technology can lead to more efficient and economical methods, allowing for staff cost reductions and the ability to outsource some tasks.

New business opportunities

As the marketplace grows and evolves, products may become obsolete. In that case, businesses need to identify what is required to increase their portfolio, become more competitive and sell new products.

Deficient performance

Changes are required when business goals and objectives are not being met. It may require re-organisation of working practices.

You may also wish to change the structure of your business operations to:

• Become a limited company: A sole trader, for example, is open to personal risk and can face unlimited liability for any business debts. A limited company, as the name implies, will limit any liability.
• Go for growth: To secure capital for expansion, it may be necessary to offer a potential investor a piece of the business in return, which may require you to create shares in the busines
• Share the burden: It can be a lonely time if things are not going well, so taking on a partner can share potential risks and provide cover for sickness or holiday absence.
• Introduce share schemes: You may wish to reward staff and a limited company allows for an employee share ownership plan. They only work within a structure that allows you to create and distribute shares, ie a limited company.

If you have found this article useful, it is part of a series of articles offering business advice.

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