#16 Why is Business Structure Important
Welcome to the first episode of Season 3. In seasons 1 and 2, I discussed in rather broad terms some of the vital information that business owners should be aware of. Moving forward, I’ll be diving a bit deeper into these topics, sharing real life case studies to add context to the information I’ve already delivered.
In this episode, I discuss the all information topic of business structure and what can happen when you’re not operating under the best business structure for you. I discuss the recent government stimulus packages during covid and how a lot of sole traders unfortunately missed out on the benefits that corporate entities were entitled to.
I talk about a common experience that a lot of sole traders have when they are personally liable for their business expenses and the consequences that followed for one of my clients. I also discuss the process of changing business structures and how this created more flexibility for another client who wished to bring on an investor.
There are many unknowns in life and in business but doing your best to think long term by including business structure in your planning will put your business in good stead for a successful future.
TOPICS DISCUSSED AND WHERE TO FIND THEM:
[1:30]: How this season I’ll be focusing on real life case studies to add context to the information I’ve already delivered in seasons 1 and 2
[2:40]: How sole traders missed out on what was available in government stimulus packages and a lot of people didn’t realise they had choices when it came to business structure
[3:20]: Companies were far better off with regards to the stimulus packages available and a lot of sole traders were waiting until their businesses were doing better before they changed over to operate as a company
[4:05]: Case study: A client unable to receive the government benefits because she wasn’t acting as a corporate entity. She was personally exposed for all her business liabilities.
[5:00]: How asset protection and personal exposure is the main concern for sole traders
[5:30]: How we performed an analysis of risk exposure and determined that her expenses far outweighed the potential income
[6:50]: How corporate entities have a lot more flexibility when it comes to adding business partners or raising additional capital
[7:30]: Case study: A client who changed from being a sole trader to a corporate entity for the purpose of bringing in an investor. A lot of administration was required.