Have you thought about restructuring your company? Or have you heard the term “restructuring” and wondered what it was, or if it was applicable to your business?
At some point, whether your business is facing challenges or not, many companies consider restructuring in order to improve their performance within their industry, save taxes and meet their goals. Many entrepreneurs also restructure their business early on when their small business begins to be profitable.
Simply put, restructuring refers to the management process of reorganizing a company in order to make it more profitable, often by reducing or deferring overall taxes. This can involve restructuring legal, ownership, operational, financial structure, or other aspects of a company. It is sometimes also described as “repositioning”, “corporate restructuring”, “financial restructuring” or “tax reorganizing”.
Cahill CPA has dealt with a number of restructuring situations due to changes in ownership (ex. bringing in new owners or changing owners entirely), mismanagement issues, response to a major crisis, and financial difficulties. Many reorganizations or restructuring are initiated for tax reasons, which may include:
- Accessing corporate losses
- Crystallizing the capital gains exemption
- Purifying the corporation to retain its eligibility as a qualifying small business corporation for capital gains exemption purposes
- Departure of one of several shareholders
- Break up of the corporation among several shareholders
Restructuring is often misunderstood and thought of as a negative thing; however, it is more often than not, a very positive opportunity for companies. In this quickly changing economy, businesses often need to make big changes in order to stay ahead in their industry and reach their full potential. In fact, our clients sometimes ask us about the possibility of restructuring before they are in a difficult position, and we are able to discuss the pros and cons of such a move. When done correctly, restructuring can deliver the intended outcomes and increase value for your company.
Further reading on this topic:
https://taxpage.com/tax-reorganizations/
Cahill CPA is located in North Vancouver, and is a family-run practice of chartered professional accountants. If you are looking for an accountant who will work for your business, contact us to set up a meeting! www.cahillcpa.ca/contact