A legal structure plan is a document that outlines the organisational and operational structure of a company or business. It serves as a roadmap for how the company will be structured and managed in terms of legal and regulatory considerations. The legal structure plan is an essential element in the overall business plan as it determines the legal structure of the company and affects how it operates, complies with laws and regulations, and manages risk.
Elements of a legal structure plan
1. Description of purpose
The purpose of a legal structure plan is to provide a clear and concise framework that guides the business in all its activities. It sets out the legal obligations and responsibilities of the company’s directors, officers, and shareholders, and ensures that these entities act in accordance with the law. It also helps to establish accountability, as all individuals involved in the company are aware of their specific roles and responsibilities.
2. Description of ownership structure
A legal structure plan typically includes a description of the business’s current ownership structure, key stakeholders, ownership percentages and key identified benefits and issues of the existing structure. It also outlines the rules and regulations that govern the business, such as the laws it must comply with and the licenses and permits it must obtain. Additionally, it may include information on taxes, liability, and financial considerations. Setting out the ownership structure of a business is essential to clearly establish the decision-making and voting processes to avoid potential conflicts and ensure that the business’s ownership structure complies with applicable laws and regulations.
3. Description of organisational structure
One of the key components of a legal structure plan is a description of the business’s organisational structure. This outlines the hierarchy of the business, from the shareholders and directors to the employees. It also identifies the decision-making process of the company and the responsibilities of each level. The organisational structure of a business is crucial for defining the chain of command and ensuring efficient communication and decision-making within the company.
4. Description of applicable laws
A legal structure plan should also include information on the business’s compliance with laws and regulations. The plan needs to identify specific laws and regulations that the business must adhere to, based on its industry and location. This includes labour laws, tax regulations, health and safety standards, and other legal requirements. The plan details the measures a business must take to ensure compliance and mitigate potential risks.
5. Liability of owners
Additionally, the legal structure plan should address the liability of the business and its owners. For instance, depending on the type of legal structure chosen, a company’s shareholders may have limited personal liability for the business’s debts and obligations. This is an essential consideration for protecting individual assets from potential legal claims against a business.
A legal structure plan is a crucial component of a Business Structuring Plan, Business Succession Plan and an Business Funding Plan as it sets out the legal framework for the company and impacts its operations, compliance, and risk management. It provides a comprehensive guide for the company’s structure, decision-making processes, and legal obligations. A well-designed legal structure plan can help a company operate efficiently, mitigate risks, and ensure compliance with laws and regulations.