Implementing a group business structure allows you to consolidate multiple entities under one 'holding company'. There can be a range of commercial, regulatory, legal and tax benefits in forming a group structure for your business.
the Product
Why should you have a group structure?
Many business owners are unaware of the commercial risks associated when the trading arm of a business and its valuable assets are held under one company. It’s a bit like having all your eggs in one basket.
A group structure separates your valuable business assets from potential liabilities thereby creating a more robust business overall. It is a great way of protecting your business from unexpected and possibly invalid bills and claims. There are many other reasons to create a group structure, for example it allows you to grow your business through acquisitions with relative ease.Ringfencing assets and liabilities
Through a group structure you can separate your valuable business assets, such as IP, cash, or property, from potential liabilities that may arise. This reduces the risk that may result from activities such as launching a new product or expanding into a new market, by keeping them separated from your existing trading entity.
Centralised assets and business functions
A common use for a group structure is to provide a central holding point for specific business functions or assets. For example, if a business grants licences to its intellectual property or decides to sell a distinct business function, these changes are easily effected through a group structure.
Flexibility for growth and development
With a parent company it is easy to add new subsidiary companies to your group if you decide to grow your business. If you decide to bring in new shareholders, with a group structure you can arrange it in a way that the new shareholders only benefit from the new business rather than the entire group.
Big corporations have been doing this for years but what about SMEs?
The main reason why SMEs tend not to have a group structure is because they may not have the time, money, or resources to do so – or, they are simply unaware of the need and benefits. Businesses naturally change with time. As the portfolio of products and/or services grow, the number of employees and your business’s product range changes, it may be valuable to consider setting up a group structure. The structure of your organisation does not have to be static, and it can be shaped and moulded to fit your ever changing and growing business.
I run an LLP - can I benefit from the group structure?
One of our product offerings is helping businesses switch to the partnership model (LLP) so we are often asked by our existing clients whether they can benefit from the limited liability component of the group structure? Since the Limited Liability Act 1855 was passed, it’s been possible to protect business owners against liabilities or losses in the UK. The House of Lords judgement in the landmark nineteenth century case Solomon v A Salomon & Co Ltd confirmed the effectiveness of this concept, however, it did not extend to partnerships. Recently, all this changed and now partnerships which are incorporated under the Limited Liability Partnerships Act 2000 can also benefit from limited liability. This means that as well as setting up a partnership model for your business, we can also help you form a group structure.
How we can help
Bottom line: we hate to see businesses being bullied and want to demystify group structures for SMEs and make sure they can benefit from them too.
Set up separate legal entities for different business functions to isolate liabilities from assets
Establish arm’s length commercial arrangements between the different entities to reflect their respective functions
Ensure the business can continue in the case that one or more of its constituent entities is threatened with insolvency
Ensure that all steps necessary to construct a robust structure are carried out properly so they cannot later be undermined
Minimise the requirements for personal guarantees or advance deposits and ensure that the impact of charges on assets is minimised
Protect business premises from unwarranted interference from debt enforcement agencies
From the blog
Want toget a better understanding of what to expect when setting up a group structure or whether you should restructure your company into a group? We’ve carefully curated the below articles from our blog to give you some more information.
Why switch to a partnership model?
Modern businesses require modern structures. Read on to find out if your business would benefit from a partnership model. Or better yet, give us a ring!
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