If your business is going better than you’ve expected and it’s time to bring more people on board as partners or even incorporate, you want to follow these simple hassle-free steps.
There are many reasons for changing a business structure but the most common one is that your business is growing faster than expected. That’s great and you have my sincere congratulations.
Sure, there could be a number of situations in which changing your business structure is necessary:
- death of a business partner
- new business partners
- financial benefits
- tax benefits
- changing ownership
- changing the legal, operational or other aspects of the business
Deciding to change your business structure means that you’re adaptive and want to manage your business successfully, so let’s go for it!
Before changing a business structure you need to understand that this will affect your partners, employees and customers and the way you deal with governmental organisations. Think about it carefully and possibly consult a lawyer that can help you understanding what is involved in each business structure in terms or liabilities and rights.
ABN – first step to change a business structure
The first thing you will need to do is cancel your Australian Business Number (ABN) and apply for a new one. You will no longer be operating under your ABN as the business that applied for it so you will need a new one.
Once you have canceled your old ABN, you will need to go through the application process for a new one and you’ll need to apply for an ACN (Australian Company Number) if you will be changing to a company structure.
The application process is very similar to starting a new company.
What’s the difference between starting a company and changing a business structure?
I hear you – it seems like changing a business structure is just like starting a new company. But in fact it’s a bit more complex – you’ll need to update your business information and inform your partners, vendors and employees of the change as well.
For example, contracts that you’ve signed with employees as a sole trader will be invalid because you’ll no longer operate under the same business number.
Here is a short checklist of documentation you’ll need to review:
- employee agreements
- vendor agreements
- customer contracts
- terms and conditions
- logo and trademarks (Contact IP Australia before)
- inform the Australian Taxation office
- update your business name details
- inform your state or territory government of any changes in address, name, phone number, etc.
You can use this online service to initiate changes to your company details.
If you already have a company and would like to change your company structure you’ll need to follow these three steps:
- File a resolution.
- Use Form 205 Notification of resolution
- Use Form 206 Application for change of company type with ASIC.
See? It isn’t rocket science to change your business structure. But it’s vital to have the right structure that supports your business goals.
You can learn more about the various business structures in Australia and what they actually mean right here.
To make sure you change your business structure hassle free, make a list of all the changes you will need to apply for, and take one step at a time, starting with a new ABN.
Alternatively you can contact your business lawyer or accountant to help you change your business structure.
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