Restructuring is when an organization changes its internal structure to increase efficiency and cost effectiveness. This act can involve merging two formerly unique entities, separating an entity into multiple parties or incorporating a formerly unincorporated enterprise. Restructuring can occur as the result of one business buying another company or an enterprise increasing in size. For example, a sole proprietorship might grow into a mid-sized business with potential to expand nationally. It would be in the company’s best interest to incorporate and begin observing regulations that apply to a business of its size. Strategic restricting can minimize financial losses, decrease production costs and otherwise impact the company’s bottom line.
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