{"id":4571,"date":"2022-05-02T14:59:34","date_gmt":"2022-05-02T19:59:34","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/business-operations\/how-to-structure-or-reorganize-a-company.html"},"modified":"2024-06-06T02:23:57","modified_gmt":"2024-06-06T07:23:57","slug":"how-to-structure-or-reorganize-a-company","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/business-operations\/how-to-structure-or-reorganize-a-company.html","title":{"rendered":"How To Structure or Reorganize a Company"},"content":{"rendered":"\n
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How To Structure or Reorganize a Company<\/h1>\n
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Companies often choose reorganization if they are having financial troubles, have new owners or staff, or are going through structural changes. Some businesses may restructure as a way to prepare for a sale, buyout, or merger.<\/p>\r\n

Restructuring a company isn’t guaranteed to work, however. While a successful restructure can lead to higher profits, greater efficiency, and debt paydown, an unsuccessful attempt can lead to bankruptcy.<\/p>\r\n

Six Flags successfully managed a company restructure. In 2009, the company declared bankruptcy due to $2.7 billion in debt that it couldn’t pay back. It eventually reorganized and emerged from its bankruptcy in 2010<\/a>.<\/p>\r\n

Kmart, on the other hand, is an example of a failed restructure. Its first attempt at company reorganization began in 2004 when it merged with Sears after declaring bankruptcy in 2002. However, Sears Holdings filed for bankruptcy itself in 2018<\/a>.<\/p>\r\n

Let’s take a look at company restructuring and reorganizing to fully understand how the process works.<\/p>\r\n

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What Is Restructuring?<\/h2>\r\n

Restructuring<\/a> is a process in which a company does a complete overhaul of its strategy, setup, and operations. A company may also reorganize its marketing strategies, staff, products and services, or business name.<\/p>\r\n

There are a few reasons why a company may need or choose to restructure. It may need to change its organizational structure or business model. Financial benefits like profit growth can also inspire a company to reorganize.<\/p>\r\n

There are two main types of restructuring: financial and organizational.<\/p>\r\n

Financial<\/h3>\r\n

Financial restructuring is any substantial change in a company’s financial structure, ownership or control, or business portfolio. The purpose of this kind of restructuring is to increase the company’s value.<\/p>\r\n

Going through the process of a financial restructure isn’t just an option for companies that are struggling financially. Financially stable companies can also benefit from it. A financially stable company can opt to restructure as a preventative measure or to save money.<\/p>\r\n

There are two components of financial restructuring:<\/p>\r\n