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Important

One thing I see quite a bit is people who have simply outgrown their structure. That might be in business, or it might be with investments. Either way, just because a structure was right when you started does not mean it is still right now.

Many years ago, I heard someone say there is no such thing as a right or wrong structure. I do not fully agree with that, but I do understand the point. In practice, there are structures that suit a certain stage of life or business, and then there are times when those same structures stop being the best fit.

That is the real issue. The question is not just whether your structure was okay at the start. The question is whether it still suits where you are now and where you are headed next.

Structures should match the stage you are at

When people first start out, they usually want something:

• simple
• cost-effective
• easy to manage

That makes sense. Most people do not need an overly complicated setup on day one.

But over time, things change. For example:

• your business grows
• profits improve
• clients become larger or riskier
• your family situation changes
• your investment strategy becomes more serious
• asset protection starts to matter more
• long-term tax planning becomes more important

At that point, the old structure might not be wrong, but it may no longer be the best fit.

And that is an important difference.

Good advice looks forward, not just backward

When we look at structure in our accounting practice, we are always trying to understand:

• where you have been
• where you are at
• where you are going

That is because structure should not just reflect the past. It should help support the future.

Too often, people get advice based only on what is happening today. But if your business is growing, or your investments are building over time, today is only part of the story.

A proper review should consider things like:

• what you are building towards
• what risks are increasing
• what flexibility you may need later
• what tax outcomes matter
• what asset protection issues should be considered
• whether the cost of changing now is better than the cost of leaving it alone

That last point matters. Better structures can create real benefits, but they also come with extra cost, complexity and admin. This is why there is never one perfect answer for everyone.

Leaving it too long can get expensive

This is where people often get caught.

They start with something simple. Maybe they begin as a sole trader, then later move into a company with an individual shareholder. At the time, that may have been completely reasonable.

But then the business improves. Profits build up. Retained earnings build up. The owner has more at risk. Future plans become more complex.

All of a sudden, what looked simple a few years ago is no longer simple to fix.

That is the bit people miss. Sometimes the clean-up job later is far more expensive than making better decisions earlier. In some cases, the “easy fix” people are hoping for is not easy at all.

A common example

A very common example is someone who started a business through a company with themselves as the only shareholder.

Nothing wrong with that at the time.

But years later, the business is doing better than expected. There are solid retained profits, the risk profile is higher, and they are now thinking about:

• protecting what they have built
• future investments
• family wealth
• long-term flexibility

At that point, the original structure may no longer be the best fit. It may still function, but that is not the same as saying it is the most suitable structure going forward.

It is not just about tax

When people hear the word structure, they often think tax first.

Tax is part of it, but it is not the whole story. Structure can also affect:

• asset protection
• ownership
• control
• flexibility
• succession planning
• risk management

Sometimes the best structure helps with several of these at once. Sometimes the current structure is still good enough. The point is that it needs to be looked at properly, not just assumed.

Sometimes you outgrow your adviser as well

This part is worth saying plainly.

Sometimes the problem is not just the structure. Sometimes you may have outgrown your adviser as well.

That is not necessarily a criticism. Some advisers are very good within a certain lane and prefer to stay in that lane. That is fine. But if your world has become more complex, you need to ask whether the advice around you is keeping up.

If you raise concerns about your structure and all you get back is radio silence or roadblocks, that is probably telling you something.

Signs it may be time for a review

A structure review may be worth considering if:

• your business is much bigger than when you started
• retained profits have built up
• your risk profile has changed
• your investment strategy has expanded
• your family circumstances have changed
• you are thinking more about long-term wealth and succession
• your current setup does not feel future-proof

That does not automatically mean you need a restructure. But it does mean you should ask the question.

The practical takeaway

Structure is not something you set and forget.

A structure can be right for one stage and wrong for the next. That is normal. The key is to review it before the gap becomes too wide between where you are and what the structure can sensibly support.

If you think you may have outgrown your structure, ask the question early. Do not assume that familiar means efficient. And do not assume that doing nothing is the cheap option, because sometimes it is the expensive one.

If this is something you have been wondering about, it may be worth having a proper discussion with your adviser. And if you are getting nowhere, it may be time to get a second view.

Have you ever had the feeling that your business or investment structure no longer fits where you are headed?

Disclaimer: This article provides general information only and does not take into account your personal circumstances. It is not financial or tax advice. You should seek independent advice from a qualified professional before making decisions about tax, legal or financial planning matters, along with loan structures or entity structure.