In the dynamic landscape of business, owners frequently face challenges that require them to adapt and evolve. It is crucial to recognise the trigger points that indicate the need for a review of the business structure, and to be proactive in seeking professional guidance.
By engaging in such discussions, business owners can understand the potential benefits of restructuring their business, in terms of optimising their structure, formulating a more effective strategy, regain financial control to bring the business back to cashflow positive, and protecting their personal assets. This proactive approach empowers owners to navigate challenges effectively, and seize opportunities for continuity, growth, and success.
Some of the points triggering discussions around business restructuring are:
- Business is growing or diversifying – is your current structure still appropriate?
- Protection for your personal assets
- Cashflow issues causing financial stress
- Mounting ATO debt with the threat of Director Penalty Notices
Business is growing or diversifying – is your current structure still appropriate?
If your business is experiencing significant growth or diversification, it may be appropriate to consider a restructure of your business.
Growth or diversification often leads to additional layers of complexity for the business and the existing structure may no longer be effective in supporting the increased demands and complexities. Separating certain aspects of the business from others may help to streamline operations and creating more opportunity and flexibility.
Protection for your personal assets
To protect personal assets, it’s important that business owners operate and structure deliberately, and in a way to remove asset ownership from ‘at risk’ individuals.
Why? Because everyone in business is carrying a level of risk as things can, and often do go wrong.
There are a number of options that can be taken to protect personal assets and ensure that you are not exposed to liabilities that put a financial strain on the business which directors are personally liable for, or worst-case scenario, business failure.
There are steps you can take to isolate and limit these risks – this is called asset protection.
Read more about asset protection in this link:
Cashflow issues causing financial stress
We have seen many circumstances where cashflow issues have caused business owners significant financial stress.
If you have:
- insufficient resources to meet your expenses (wages, and superannuation)
- insufficient resources to meet all your obligations to your creditors
- mounting ATO debt
- you’re unable to source enough working capital to plug your cashflow gap
Then it’s time for professional assistance – this is whether you are experiencing just one or a combination of these financial stress factors.
We understand the financial and emotional impact during these hard times can be so devastating – and we are here to try and help you restructure to resolve these issues. Often, taking a proactive approach will have far better outcomes than waiting until the depth of the situation is unrecoverable.
If you’re facing a situation like this, please be sure to consider if your personal assets are protected.
Mounting ATO debt with the threat of Director Penalty Notices (DPN)
Businesses or individuals with temporary cash issues can easily fall behind on their ATO payments and they will face significant hurdles when the ATO acts to recover the tax debt.
It is always best to manage tax debts with a proactive approach. Obtaining professional assistance early to engage the ATO in negotiations for payment arrangements is likely to reduce long-term negative consequences.
Tax debt can include tax liabilities, PAYG, GST, or superannuation. Where a company fails to pay PAYG, GST or superannuation the ATO can recover the amounts from directors by issuing a Director Penalty Notice (DPN). By issuing a DPN the ATO has enacted their right to recover the outstanding amounts from the director personally. Put another way, the ATO can sue the director and expose personal assets to recover a company debt.
To learn more about DPN, please refer to an article written by ReGroup Solutions – Director Penalty Notice
Again, taking a proactive approach if you have mounting ATO debt is essential in staying in good favour with the ATO. Accountants can negotiate payment arrangements to manage the debt and discuss restructuring options with you that may save your business and protect you from recovery action.
Again, if you’re facing a situation like this, please be sure to consider if your personal assets are protected.
Why you should consider if a business structure review is right for you
Business restructuring presents options and opportunities, particularly for those experiencing significant growth and diversification, and during times of cash flow challenges.
Embracing the advantages of business restructuring can pave the pathway to success, enabling business owners to enjoy the rewards of financial stability, operational efficiency, and a renewed strategic focus. By leveraging these benefits, you can effectively navigate obstacles, overcome challenges, and not only survive but thrive in the ever-changing and competitive business environment.
How can Walsh Accountants help?
If you would like to discuss your options around business restructuring and structuring for personal asset protection, our team is here to help you.
With specialists in Business and Entreprenurial Support and Focus Advisory, we have all the skills and knowledge you need to help you and your business thrive.
For a complimentary discussion based on your personal circumstances, contact us today to be connected with a member of our accounting team.
