Complex Business Structures and Restructuring
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What is a Business Structure?
A business structure refers to how a company or group of companies are organized within a business and how the elements of these organizations relate to each other. Depending upon the industry the company may competes internally, and face goals from the various ownership groups. Thus, depending on the needs and goals of a client, a company may receive greater financial benefits and protections by remaining whole, or organizing a more complex structure utilizing a series of independent but interrelated companies.
When you began your company you may have started with a single entity. Since then, your company has grown substantially in some manner such as expanding into other industries or expanding vertically to acquire upstream or downstream entities. Perhaps the expansion was geographic and you now own multiple locations. Any of these factors is a red flag that your business structure needs to change as well.
For example, let’s say John writes a book under his company BookCo Inc. Book sales skyrocket. John decides BookCo will now make toys based upon characters in the book. Soon he decides BookCo will make films based upon the book. Next BookCo opens a coffee shop based upon the book. Finally, book sales are so good he decides that BookCo will start a printing company where he will print his own book, as well as provide book printing for others. John is now a mogul in various horizontal and vertically integrated businesses, but if he’s done this all out of Bookco he has set up his business like a house of cards. A catastrophic financial event in any single business can infect, implicate, damage and ultimately destroy the entire empire.
We can help you avoid John’s fate.
Different Business Structures
The structure of a business, whether complex or simple, will depend upon the size of the business, business aims and corporate culture. Business structures may also be affected by factors outside of its control (external factors) such as the nature of the business, or geographical concerns, such as the spread of its customers.
Companies commonly consider complex business structures when the business is either multi-product, function, or geographically severable.
Multi-product based companies may create separate structures for products. For example, a clothes designer with multiple brand labels separating businesses by product label. Function structures separate companies by department, for example creating a marketing company that handles advertising and marketing for other groups within the overall structure. Geography is probably the most common of all. An owner of 20 restaurants has a structure where each establishment is its own business.
In addition to the manner in which companies operate independently, we also consider how they will operate together. Common types of business structures in which related companies operate within include Hierarchical structures (“Tall” or “Pyramid” structures), Horizontal structures (“Flat” or “Flat Pyramid”), or Matrix structures.
In a hierarchical structure the business is organized in layers, with the higher layers having more authority than those below them. Flat structures have fewer layers and more people in each layer. Matrix structures create “Department” companies with unique skills which are drawn from many parts or functional areas of the business such as marketing, operations, finance, and human resources. These are then organized into companies that serve the whole.
There are distinct advantage and disadvantages to each structure, so choosing the perfect complex structure for your business may seem daunting.
We can help.
Our South Florida based Business Law Attorneys serve clients in Palm Beach County, Broward County, Miami Dade County, and throughout Florida.
We understand your business because our Florida Transactional Business Law Lawyers, have been in your shoes, not only as business law attorneys in Florida, but as business people.
If you’re interest in learning more about protecting your business, and the many other advantages of setting up a proper business structure, please contact us.
We want to hear your story and share ours.