Daily Law Group
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Why might you alter your business formation?

Like many things in life, businesses grow and develop over time – often in unexpected ways. While you may have had one goal in mind when you launched your concept, you may have found success by taking things in another direction.

There is no way to predict precisely what your business will need or when those requirements will become critical. However, you need to be able to recognize when shifts are necessary to remain competitive in your industry. In some cases, it may be best to change your business structure.

Business structure may change for various reasons

Like many entrepreneurs, you may not have had an in-depth knowledge of California’s business laws when you launched your startup. And, as so often happens, specific shifts may require leadership changes, investment funds or tax exemptions.

Whether you believe it is time to simplify or increase the complexity of your business, multiple factors could contribute to your decision to designate a new structure for your organization. Typical reasons for implementing this type of change include:

  • Selling shares to the public. You will probably need to become a corporation prior to your initial public offering (IPO).
  • Legal protection. Many entrepreneurs start their business alone, eventually realizing they need to hire additional workers and/or separate their personal liability from that of their company.
  • Changing ownership. No matter the opportunity you face, a co-founder may choose to separate from your business. Or when things are going well, you might decide to add new owners to your team.

There are various business formation options, each with different requirements, tax ramifications and liability. And depending on the way your business progresses, the choice you made when you started your business may not be the most beneficial way to continue.

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