business-model, business-structureThere is a unique component (business process) in the business I’m designing. It could be that the business does a pivot at some time to focus exclusively on that component. That’s not my intention, but it’s an obvious possibility.
My question is if there would be any advantages of setting that component up as its own entity from the beginning? I intend to focus on the main business, but I wonder if this could provide some flexibility to provide a separate income stream if necessary. And if I did have to pivot, it might be easier to do with the separate entity already in place.
An old school answer would center around the issue of ownership. Creating a seperate company to own a particular business process and then having that company license its process to your main business venture, establishes that the new company’s current stock holders hold complete control of that process, no matter how much the ownership of the main business venture gets diluted by investors, sweat-equity inititives and buy outs. If a busiess practice is general enough to apply across multiple industries and/or projects, not seperating its ownership means that all of its future applications will have to be owned by or licensed from, your current business entity.
In terms of the new school concepts of agility, fail-fast and pivoting with your market, I don’t see that the ownership arrangement would have any effect.
Also note that creating seperate companies to own each business process is an significant ongoing expense, not only because of recurring fees but also because of the tax ramifications of such decision. Get a lawyer to explain all the ins and outs of your country and state’s rules and requirements.
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