Business Restructures

Restructuring a business can be a valuable tool for ensuring that both tax efficiencies are met, and that the business can be managed in the desired way, by the right people.

There are several reasons you might wish to restructure your business, but the main ones are:

1) To release some or all of your capital from the business

You might decide that you wish to exit from the business, or take a step back, and allow family members or even current or new management to have a stake in the business. If they don’t have the money to buy your shares from you, a restructure can allow a new company to buy your shares and pay you for them over a period of time. In this way it will not put too much financial strain on the business, whilst still allowing the new management team to receive shares without any cost to them.

2) If the business has several distinct trades or divisions and you wish to prepare one for an eventual sale, or to pass the ownership and management of one arm to someone else.

A restructure can allow the business to split into divisions, which in turn allows the appropriate restructures to take place until the desired ownership is achieved. This also allows for greater tax planning opportunities to be explored within the individual divisions.

3) If you wish to protect the assets held within your company

A restructure can offer a solution in this respect, as you can decide to form a holding company to own the assets, leaving the trading company to earn the revenue risk free. Asset Protection can be achieved with various forms of restructure and can prove invaluable from a risk-strategy viewpoint.

Releasing capital from a business can be a tax effective method of extracting profits, as if Entrepreneurs Relief conditions are satisfied (broadly, for the 12 months prior to the transaction you own more than 5% of the voting rights, are an officer or employee of the company and the company is a trading company), any extraction of capital from the company is taxable at only 10%.

We can submit an application for clearance to HMRC, which effectively outlines the proposal before the restructure has taken place. This provides certainty to the tax treatment of the transaction as, once agreed with HMRC, it confirms that any distributions can be treated as capital and that no anti avoidance legislation has been breached.

If you would like to discuss the process of restructuring your business in further detail, please get in touch on 0121 693 5000.

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Jerroms is a trading style of both Jerroms Business Solutions Limited (Co ref no as already shown) and Jerroms (Bromsgrove) Limited (company ref no as already shown). Registered office for each of these companies is: The Exchange, Haslucks Green Road, Shirley, Solihull, West Midlands, B90 2EL.

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