Most businesses start in a small way, either as an LLC or an LLP venture. Over time, it grows in many aspects, including its employee base, operational areas, niches, etc.

As a venture grows, it becomes necessary to restructure it after a certain point for sustained growth. However, restructuring a venture involves multiple complexities. It is not only about tweaking legal structures and some internal processes! To manage revised tax implications and better compliance, seeking professional assistance is necessary.

Business restructuring helps a venture improve operational efficiency, reduce liabilities, and achieve long-term growth. To ensure the modified entity stays at the top of the taxation game, seeking the services of a veteran CPA firm is recommended.

Such an entity, with expertise in tax planning and business advisory, can guide clients to avoid tax errors and save on deductibles.

Primary Tax Considerations for Business Restructuring

Any business restructuring, including acquiring a smaller company or merger of 2 entities, has specific tax consequences. A professional CPA firm can help such clients address the following tax aspects of restructuring:

• Entity Structure-Related Taxation—Changing the entity structure can directly affect its tax status. For example, LLCs and S-Corporations have pass-through taxation, which enables them to bypass corporate income tax. C-Corporations are subject to dual-level taxation. Veteran CPA firms like Hogan CPA Financial Services help clients choose the proper structure and obtain applicable tax benefits.

• Payroll Tax Venture Restructuring– It may sometimes lead to employment term changes, impacting payroll taxes. A merger may lead to Federal Unemployment Tax Act credits, impacting payroll costs. Shifting operations across various states may need multi-state payroll adjustments. Top-notch CPA firms help clients navigate the complex maze of payroll tax, assuring smooth compliance.

• Capital Gains Implications and Depreciation-Restructuring may sometimes involve asset transfer. This impacts capital gains and depreciation calculation, in turn. A CPA firm may develop tax-efficient strategies for clients seeking asset transfers. This helps the clients reduce capital gains liabilities and use depreciation benefits most.

• IRS Reporting—Business restructuring can sometimes attract IRS attention, more so when it involves major asset shifts. At this juncture, the company’s state and federal filings may have to be updated. An experienced CPA firm helps clients cope with IRS compliance.

• Shareholder Tax Obligations-Share and equity distributions occur in some company restructurings, leading to a change in shareholder tax obligations. For example, Shareholders in C-Corps have dividends and gains taxes. Top-notch CPA entities can assist clients in structuring equity changes aligning with shareholder tax goals.

The Importance of Hiring Veteran CPA Firms for Venture Restructuring

Businesses hiring apt CPA partners for restructuring get the following benefits:

• A tailored tax strategy and no compliance pitfalls,
• No risk of IRS penalty and complications,
• Smoother process transition.

Final Words

Several CPA firms offer restructuring services for clients of varying types nowadays. To choose the right partner, businesses should focus on the agency’s track record in this sector and the feedback of existing clients. They should collect all necessary details to help them make the right decision.