Company structure is the foundation of your business for future growth.
Many entrepreneurs starting a business give too little consideration to the structure of their company. This can lead to enormous complications and even business failure as the business grows or raises capital. In our experience at ecentre, it is common for founders to be totally focused on product development and customer development and therefore delay making decisions about company structure. Having the right structure in place from the beginning can reduce risk, increase success and avoid issues with shareholders and other stakeholders in the future.
Company structure is not just about who owns how many shares. Having the right structure makes business compliance, including tax obligations, easier and less costly. Structural inadequacies can be difficult to solve after the company is launched and has customers.
A potential investor will always examine the company structure as part of their due diligence. The structure will help determine if they invest or not. A clear exit strategy will reduce the risk for investors and ensure that the company is structured with the future in mind.
Frequently founders choose a two company structure with one company owning the intellectual property and licensing it to the operating company. Managing the ownership of intellectual property is an important function of the company structure.
The company structure should be put in place early on and should take into consideration the future activities of the company such as capital raising, issuing shares, employee equity, venturing offshore, valuation, tax and shareholder agreements.
If you are starting a company or have questions about structuring your business then come and hear an expert on the topic at the ecentre free lunchtime seminar on 19 June. You can register here.