Corporate restructuring can be a helpful tool for businesses, whether that means adding a partner, going through an entity change or just trying to improve cash flow. But they can be tough to navigate without help, especially if your business is going through other big changes at the same time.
Advisors can help you manage corporate reorganization smoothly by guiding you through whatever type(s) of restructuring best fit your business needs. They can also provide vital information on the technicalities of restructuring, such as the different business entity types and their potential tax savings.
Read on to find out more about the different types of corporate restructuring — and how advisors can help.
What Are the Types of Corporate Restructuring?
There are many different types of corporate restructuring. Each type takes care of a different business need, and they aren’t mutually exclusive. For example, if you’re going through a merger and acquisition, you might choose to sell business property and make operational changes within your company at the same time.
When planning on how to restructure a company, your advisor will walk through your future goals, compare them with how your business is currently doing and help you decide what reorganization models work best for you. They’ll also help you minimize the impact of business losses while you go through restructuring.
Mergers and Acquisitions
Mergers and acquisitions are a legally complicated process. They are themselves a form of corporate restructuring; they can also be a good time to consider other types of strategic restructuring.
Advisors can help you do everything from figuring out the tax implications of a merger and acquisition to helping you decide what other changes your company needs to make. Without them, you could end up with a significantly worse deal than the company you’re merging with or acquiring.
Financial Restructuring
Financial restructuring involves changing your company’s approach to finances, generally in a way that alters your company’s capital structure. If you need corporate debt restructuring, this is often the best way to do it.
This could be in response to small business tax law changes or recurring revenue issues. Options include, but aren’t limited to,
- Seeking out new revenue sources,
- Minimizing costs by controlling variables,
- Making divestments and selling off portions of your business, or
- Debt refinancing or even declaring bankruptcy.
Advisors can help you take a deep dive into your finances and assess whether you need to commit to financial restructuring, or whether making a smaller change (such as redetermining reasonable compensation for your business owners) would be enough. They can also help you decide what type of financial restructuring best fits your business’s needs.
Legal Restructuring
Legal entity restructuring involves changing what type of corporation your business is. For example, if you currently run a C Corp but are struggling under double taxation on earnings, you might choose to restructure as an S Corp (or vice-versa) instead. Without talking to an advisor, you could unknowingly make a decision that has significant impacts on your business long-term from a tax and legal perspective.
Advisors can help you make those decisions. They’ll be able to provide a thorough breakdown of your options, from explaining the tax benefits of an S Corp to helping you choose whether a C Corp or a pass-through entity is better for your needs.
Organizational Restructuring
An organizational restructuring is entirely internal. It involves changing how an organization is laid out. This might mean:
- Flattening your company’s hierarchy,
- Adding or merging divisions, or
- Reassigning or eliminating workers.
Advisors can help you figure out how to best reorganize your business by highlighting parts of your organization that aren’t providing optimal revenue.
Operational Restructuring
Operational restructuring involves increasing the efficiency of your company’s operations. This means looking at your company’s costs versus its revenue and identifying parts of your workflow that aren’t increasing revenue enough to justify its cost. You might want to outsource these operations to a third party or just streamline your current in-house operations.
Advisors can help you identify inefficiencies in your current workflow and suggest solutions. They can also help you find tax savings you might be leaving on the table, such as corporate expense deductions.
How Advisors Help Restructure a Company
Advisors can help you with a corporate restructure if your company is in distress, but that isn’t the only time that they can help. If your company is on the verge of any change, whether that be a merger, a change in strategic positioning or a need for debt restructuring, advisors can help.
The earlier you start working with an advisor, the more they can do. The time to talk to an advisor about any restructuring you might be considering is now – on the front end of the decision. Advisors in your niche will be able to highlight specific savings opportunities you might be unfamiliar with: for example, a farming-focused advisor might know farming tax breaks you aren’t taking advantage of.
Because they have experience working with companies like yours, they’ll be able to suggest tried-and-true corporate restructuring methods you might not be familiar with. They can also proactively audit your company’s costs and revenue to find issues within your company you might not even be aware of before they become an issue.
Landmark Can Help with Your Restructuring Needs
Corporate restructuring can be a stressful time for a company, but it doesn’t need to be handled alone. Hiring advisors can help both you and your employees feel assured that you’re making the right decision.
Landmark’s advisors have decades of experience helping small and medium-sized businesses weather corporate restructuring. Contact Landmark CPAs today to get started.
