Through a group structure you can separate your valuable business assets, such as IP, cash, or property, from potential liabilities that may arise. This reduces the risk that may result from activities such as launching a new product or expanding into a new market, by keeping them separated from your existing trading entity.
A common use for a group structure is to provide a central holding point for specific business functions or assets. For example, if a business grants licences to its intellectual property or decides to sell a distinct business function, these changes are easily effected through a group structure.
With a parent company it is easy to add new subsidiary companies to your group if you decide to grow your business. If you decide to bring in new shareholders, with a group structure you can arrange it in a way that the new shareholders only benefit from the new business rather than the entire group.
The main reason why SMEs tend not to have a group structure is because they may not have the time, money, or resources to do so – or, they are simply unaware of the need and benefits. Businesses naturally change with time. As the portfolio of products and/or services grow, the number of employees and your business’s product range changes, it may be valuable to consider setting up a group structure. The structure of your organisation does not have to be static, and it can be shaped and moulded to fit your ever changing and growing business.
I run an LLP - can I benefit from the group structure?
One of our product offerings is helping businesses switch to the partnership model (LLP) so we are often asked by our existing clients whether they can benefit from the limited liability component of the group structure? Since the Limited Liability Act 1855 was passed, it’s been possible to protect business owners against liabilities or losses in the UK.
The House of Lords judgement in the landmark nineteenth century case Solomon v A Salomon & Co Ltd confirmed the effectiveness of this concept, however, it did not extend to partnerships. Recently, all this changed and now partnerships which are incorporated under the Limited Liability Partnerships Act 2000 can also benefit from limited liability. This means that as well as setting up a partnership model for your business, we can also help you form a group structure.
Establish arm's length commercial arrangements between the different entities to reflect their respective function.
Ensure the business can continue in the case that one or more of its constituents entities is threatened with insolvency.
Minimise the requirements for personal guarantees or advance deposits and ensure that the impact of charges on assets is minimised.
Protect business premises from unwarranted interference from debt enforcement agencies.