Change your business structure

When you originally set up your business, you will have probably chosen a legal structure that was suitable for the business at the time. However, you should regularly review your business structure to ensure it continues to best meet your business' needs.

Reasons to change your business structure

You might wish to change the structure of your business operations to:

• Reduce your personal risk exposure - a sole trader, for example, faces unlimited liability for any business debts. Becoming a limited company will limit liability.
• Raise more capital - cash injections are generally only possible if you offer an investor a piece of the business in return, which may require you to create shares in the business.
• Share the responsibilities and risks of ownership - for example taking on a partner can reduce the burden and provide you with cover when you're sick or away.
• Plan for retirement or sell your business - certain structures may be more attractive for potential buyers, eg shares in a business are easily transferable so ownership may change but the business continues. Sole proprietorship or partnerships may dissolve on death - ownership of a limited company may be more readily distributed to family members.
• Reward your employees - employee share ownership plans only work within a business structure that allows you to create and distribute shares, ie a limited company.
• React to changes in your type of business or way of working.

Professional advice

Whatever you decide to do, make sure you obtain professional advice before you change your business structure. See expert financial advice.

It is important to note that some changes to your business will require you to inform Companies House. For more information, see reporting changes to Companies House.