If you believe your business’ corporate structure may be resulting in more expense than value, it may be time for you to consider entity restructuring. This is the process of changing your legal structure (LLC, S-corp, etc.) into something that better fits your growth or other changes. Entity restructuring is an area where you’ll definitely need the help of a certified professional, but you might be worried about the cost.
There are a lot of factors that come into play during restructuring, such as tax liability, personal risk, and IRS filing requirements. It’s a complicated process that will be different for every business. This makes it difficult to estimate your expected costs with any precision. However, there are several elements that will influence how much you will pay. A few of those include:
- The size of your business — In general, the larger your operation, the more complicated the process, resulting in a higher cost.
- Your current structure — Some structures are more complex to begin with. Coming from a sole proprietorship will likely be less demanding than if you’re already an LLC or have subsidiaries.
- Their experience — It stands to reason that an experienced legal or financial team might have higher fees that someone who has little experience. But generally speaking, you get what you pay for.
Depending on these and other factors, your entity restructuring costs may amount as little as a few thousand dollars, up to several thousand. While it’s easy to understand why a lot of business owners might be reluctant to undertake restructuring because of the associated costs. But most often, if your company is really ready for a new structure, the tax savings by themselves are enough to justify the investment. You may also simplify your operations for greater efficiency, plus reduce any personal liability you may currently have. In fact, the restructuring service will often pay for itself within the first couple of years.
Ideally, you should conduct an evaluation of your business structure with a professional at least once per year. Regular monitoring can help you identify changes that could impact the fit of your current legal setup. As with many other business issues, the best way to evaluate your own situation is to consult a professional. They can help you evaluate whether your current structure is still the most beneficial. Weighing the pros and cons, they’ll work with you to identify your next steps should a change be warranted. If so, professional guidance ensures you’ll be well prepared for the transition.