Legal entity simplification | Deloitte US | Tax

Perspectives

Legal entity simplification

Quantifying potential cost savings

Entity simplification projects can yield substantial benefits, but they also can involve substantial costs. Before embarking on such a project, it is prudent to estimate not only the cost, but also the potential benefit to increase the likelihood of financial success.

Estimating the cost savings

One negative side effect of merger & acquisition activity in recent years is unwieldy legal entity structures. These complex structures tend to drive up costs across the enterprise, so it’s little wonder that cost reduction is perhaps the most common driver of legal entity simplification efforts. But to achieve these cost savings, the enterprise must embark upon an entity simplification project, and these projects cost time and money. Company leadership will often demand an estimate of the potential cost savings before authorizing such a large effort.

This article provides a more rigorous method for estimating the cost savings that are possible with entity reduction efforts.

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