Entrepreneurs may have to change their strategy several times after coming up with an idea for a new business concept. Frequently, the idea someone has will require some tweaking to turn it into a profitable business model. They may have to scale up or down their initial plans or move into a different but adjacent area of the same industry.
For example, someone who starts a local retail shop may discover that customers respond to certain products better than others, forcing them to adapt how they run the company and what they stock. If you have had to change the focus of your company or the scope of operations, then you may need to change the business type you originally selected.
Companies require different protections
Perhaps when you first started your small retail shop, you operated the company as a sole proprietorship. You intended to sell products manufactured by another company. However, you have since started manufacturing your own products or now offer services to customers in addition to pre-made products.
You may find that starting a limited liability corporation LLC is a better option when the possible risk associated with your business operations increases. You don’t have to close your company and start a new one. You just have to change its legal form.
On the other hand, started the company with a partner, but they had a medical issue or filed for divorce from their spouse. You may need to switch the company over to a different form now that you will be the only owner. Similarly, if you are about to quickly expand your operations or take a once-large company and pare it down to one central facility, the structure used for the company originally may no longer adequately protect you.
How do you change your business structure?
There are numerous steps involved in updating your business form. The first is to determine what the new structure should be. The second will be to file the necessary paperwork with regulatory agencies, the state and tax authorities. You may also need to notify your accountant and change some internal practices at the business.
When done properly, updating your legal form for your business can extend better protection to your company. Understanding the steps involved in choosing and establishing your company’s legal type will play an important role in its ongoing success, not just its initial creation.