Re-organize your business(es) & rearrange your affairs to cut taxes, protect vital assets & operate efficiently.
Most businesses are not structured to their best advantage. Most privately owned businesses have only one company., which often hinders their success. But Global 500 companies have several, sometimes hundreds, of subsidiaries to achieve all their business goals. One of my clients is VP of tax for a Global 500, and her brother jokes that she’s always creating new foreign subsidiaries. They are the tools of her trade.
Reorganizing the business to protect assets & cash flow & cut taxes will eventually become essential for success in the chaotic, tumultuous 21st century.
See the following list Global 500 companies with links to their SEC filing.
Many of them have hundreds related companies. Why do they have so many? They aren’t just for show. Don’t add companies without a purpose in mind, but many businesses should have related businesses owned by the same owners. Generally speaking, your ideal structure will involve more than one company.
Tax Avoidance Purpose
The S corp is the best organization for tax purpose. Income earned by an LLC is subject to three taxes: income tax, FICA tax & Medicare tax. Income earned by an S corp is subject only to the income tax.
A client’s business was hit with a nuisance suit. They mounted a defense, which was just a knee jerk reaction. When they told me about it, I told the principals since their vital business assets were in another company, the company owned nothing worth incurring a lot of legal fees to defend. I advised them talk to their attorney about abandoning the company. He agreed. Problem solved. But had they been doing business under their previous structure, they would have been if for a long and expensive lawsuit.
Asset Protection Purpose
If you personally lose a lawsuit, you could lose everything you own. But if your corporation loses a lawsuit, only corporate assets are subject to forfeiture. And even that can be protected with more entities.
Business Organization Purpose
We have organized hundreds (thousands?) of businesses from initial startups, to complex businesses, including a significant number of companies needing to be re-organized to do business in the chaotic 21st century. We create all the companies, recognize the and define the operating relationships. We utilize every entity in the book, but primarily the big 4, partnership, LLC, S corp., C corp.
We are partial to forming companies in states that specialize in businesses and/or asset protection. Among them are Wyoming, Delaware & Nevada. Neither of those states are entirely tax free.
Business Re-org Purpose
“Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs.” (Wikipedia.)
To meet their full potential, 99% of successful businesses restructure at some point. It’a almost impossible to avoid. The structure selected at founding is seldom adequate for a thriving business.
Caterpillar is a good example. They regularly re-organize. I can’t help but wonder if more businesses would be more successful if they followed the Caterpillar example. This is not the first time Caterpillar as restructured.
GE is also restructuring. This isn’t their only bite at the apple, but this reorg may determine GE’s future.