Formation and Maintenance of Business Entities
Businesses commonly start under a structure which their needs outgrow over time. This can happen due to changes in relationships with key employees or affiliates. For example, a third-party service provider and a business may realize they can be more effective while operating under the umbrella of one entity. It can also occur when a business begins to offer services or products that it did not offer before. For example, a manufacturer may find that its direct-to-customer sales increase to the point of necessitating a new entity that is its own distribution company.
In other cases, a company that offered services may realize that it can capitalize on its market by manufacturing its own product line through a new entity. The structure of a business should match its evolving needs. A business that started as one entity may need to evolve into multiple entities linked to one another through elaborate agreements.