Why Business Structure Matters More As You Grow
When you first start a business, tax planning is usually simple. You focus on what you earn, what you spend, and what is left over.
But as your business grows, the strategy behind how your company is structured becomes far more important than the day to day numbers.
If you own multiple businesses, have large retained profits, or hold valuable assets inside your trading company, your current setup might be costing you more tax than necessary. In some cases, it can even expose your assets to unnecessary risk.
This is where holding companies and group structures come in. They are used by successful entrepreneurs across the UK to legally reduce tax, protect wealth, and reinvest more efficiently.
Here is why the structure of your business matters more than you might think.
Dividends Between Group Companies Can Be Tax Free
When companies are part of the same group, one business can pay dividends to another without triggering additional tax.
This allows profit to move around the group in a tax efficient way, rather than being taken personally and taxed immediately.
It creates flexibility and gives you more control over where money sits within the business.
Profits Can Be Reinvested Without Personal Tax
A trading company pays corporation tax on profit. If you withdraw that profit personally, it becomes subject to dividend tax.
But if you pass profit up into a holding company instead, you can reinvest it elsewhere without paying extra personal tax.
This is one of the biggest advantages of a group structure. More money stays inside the business ecosystem and can be used to grow.
You Can Protect Assets From Trading Risk
Many business owners unknowingly expose valuable assets to risk by keeping everything inside the trading company.
For example:
Cash reserves
Property
Investments
Intellectual property
Equipment
If a claim were ever made against your trading business, these assets could be vulnerable.
A holding company structure allows you to separate the valuable assets from the day to day trading risk.
Separate High Risk and Low Risk Activities
Not all business activities carry the same level of risk. Some operations naturally involve more liability or financial uncertainty.
By using separate companies within a group, you can:
Ring fence high risk activities
Keep low risk assets protected
Prevent one part of the business damaging another
This approach is common in property, construction, e-commerce, manufacturing, and service based businesses.
Prepare for a Cleaner and More Profitable Business Sale
If you plan to sell your business in the future, your structure matters.
A group arrangement can help you:
Separate out assets you want to keep
Sell only the trading business
Keep tax on sale proceeds as low as possible
Make the business more attractive to buyers
Buyers prefer simple, clean structures. A well organised group setup can significantly increase the value of your business.
Keep More Capital Inside Your Business Ecosystem
The biggest benefit of a well designed structure is simple. You keep more of your hard earned money inside the business.
Less tax leakage.
More reinvestment potential.
More long term growth.
This is not tax avoidance. It is completely legitimate UK company law, used by business owners who want to grow strategically, protect their assets, and reduce unnecessary tax.
The Bottom Line
If your business is growing, now is the time to review your structure.
Your current setup might have worked when you started, but it may not be the best design for where you are going next. A holding company or group structure could:
Reduce your overall tax
Improve reinvestment
Protect your assets
Increase your business value
Give you more control
If you want help reviewing your setup or building a more tax efficient structure for your future, send me a message. I can walk you through your best options and help you plan for long term growth.
Meet Lewis
Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.
Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.
