What Is a Group Structure and Why Do Businesses Use Them?

As companies expand, they naturally outgrow their original shape. They can extend into new areas of activity, diversify their interests, go overseas, or just want to isolate the heart of what they have established. Maybe the best way to manage that complexity is by constructing a group structure.

But what is group structure, anyway? Why are so many growing businesses obsessed with it? And how does it manage to offer both protection and opportunity?

This article breaks down what a group structure is, why it matters, and the ways in which it will benefit your business in the short and long term.

What Is a Group Structure?

A group structure is where multiple companies are united by ownership, with one firm (the parent) typically holding at least 75% effective interest in the others (the subsidiaries) for group relief purposes, or more than 50% for capital gains groups. They are all functioning towards a common objective or strategic vision but remain legally separate.

Legally, they are still separate entities. They each have their own bank account, pay their own taxes, and file their own company tax return. But they are all owned or controlled by the same ultimate entity.

This structure allows for both centralised control and operational independence, a powerful combination for strategic planning, tax efficiency, and risk control

Types of Group Structures

Holding Company Structure
Parent company owns majority shares and controls subsidiaries.
Management Company Structure
Control exercised through management agreements without majority ownership.
Joint Venture Structure
Separate entities formed jointly and managed collaboratively for specific projects.

Group structures can vary in complexity, from simple parent-subsidiary relationships to large pyramidal or networked holdings seen in corporate groups worldwide.

Why Do Businesses Use Group Structure?

Let’s explore the main reasons why group structure is so widely used.

1. Risk Separation and Asset Protection

One of the most compelling reasons to adopt a group structure is to isolate risk. Different business activities carry varying levels of risk. By placing them in separate companies, you ensure that problems in one area don’t spread to the rest of your business.

For example, if your trading company is sued or becomes insolvent, the property or intellectual property held in a separate subsidiary is shielded from those liabilities. This is sometimes referred to as “ring-fencing assets.”

In high-liability industries, such as construction, hospitality, or finance, this separation is considered best practice.

2. Tax Efficiency and Group Relief

In many jurisdictions (including the UK), groups can benefit from various tax reliefs:

Group loss relief allows one company’s trading losses to be offset against another company’s profits.
No gain/no loss transfers between group companies often allow assets to move internally without triggering tax.

This means group structures allow for more flexible tax planning, especially when managing cash flows, reinvestment, and expansion.

However, these tax advantages come with conditions, so advice from a tax professional is crucial.

3. Operational Efficiency and Focus

As businesses diversify, it makes sense to split functions across different entities. For example, your operations team might work in one company while HR and logistics are managed in another.

This allows for:

More focused management
Tailored KPIs and budgeting
Clearer internal accountability
Improved agility when making decisions within departments

Having each business unit operate semi-independently can drive performance and innovation while still being guided by overall group strategy.

4. International Expansion

Many companies expanding into foreign markets will establish a local subsidiary within their group structure. This allows them to:

Hire local staff under domestic employment law
Comply with local tax and regulatory requirements
Keep liabilities ring-fenced to that jurisdiction

Having a separate legal entity in each country makes operations cleaner and limits the exposure of the main business to international risks.

5. Brand Segmentation and Specialisation

Some businesses create group structures to house different brands under one umbrella. This is especially useful if:

The brands serve different customer bases
You want to maintain unique cultures or pricing strategies
Each brand has its own marketing, sales, or supply chain setup

A good example would be a hospitality group that owns several restaurants, each with a distinct name, target audience, and brand identity.

Conclusion: How to take your business to another level?

A group structure can be a powerful tool to take your business to the next level, whether you’re looking to scale, protect assets, manage risk, or streamline operations.

But it must be done strategically, not just for the sake of appearances. A poorly thought-out group can be a burden rather than a benefit.

So, if you’re considering a group structure or want to restructure an existing one, get the right advice from accountants, tax advisers, and corporate lawyers who understand both the technical and practical side.

Need help forming a group structure for your business or investment strategy? We assist with group setup, intercompany agreements, tax planning, and ongoing compliance. Reach out today to explore your options.