Business owners who have been advised by their accountants to set up a holding company, also known as a parent corporation or limited liability company need to also contact their Edmonton bookkeeping company. The reason is that there are additional accounting and bookkeeping that entrepreneurs must do if they have a corporation structured this way. Since many entrepreneurs struggle with understanding their own basic business finances, adding another corporation to their structure increases the difficulty, and more important than ever for entrepreneurs to understand what they need to know in order to ensure the accuracy of their finances.
The first thing that business owners need to understand is what holding company actually is. This is a corporation that has been set up for the primary purpose of owning another corporation. Instead of the business owner owning all of the shares in a company, the corporation does that, which gives the business owner an additional layer of protection that incorporation offers them. Edmonton companies are also known as parent corporations and limited liability companies.
One of the most important things that an entrepreneur should keep in mind if they have a holding company as well as and operating corporation that they need to communicate with their Edmonton bookkeeping company. Communicate clearly and communicate often. The reason why, is because they have to ensure that there keeping track of all transactions and noting which corporation that transaction was made for. This way, it eliminates the possibility of their Edmonton bookkeeping company accidentally assigning transactions to the holding company when it should have been assigned to the operating company and vice versa. There are a number of transactions that could be inaccurate if an entrepreneur is not taking care to be very clear about all transactions.
In addition to the transactions being assigned to the wrong corporation, add in the complexity of misclassifying various transactions in various corporations, and it becomes very clear why an entrepreneur needs to be very organized if this is there corporate structure. One thing that business owners can ask their Edmonton bookkeeping company to do to minimize errors is to do the bookkeeping monthly so that both corporations can balance their finances every single month. Not only will this help an entrepreneur have up-to-date financial statements so that they can make informed financial decisions in their business. But what it will also do, is ensure that the corporations balance when it comes time to do the year-end.
This is especially important if an accountant sets up the year ends to happen at different times in order to minimize taxes. Having them be accurate on a month-to-month basis means that is more likely that when it comes time to do the year-end, it will take less time and less work to complete the year ends.
By understanding what a holding company is, and the way that the bookkeeping needs to be different can help entrepreneurs take advantage of all the benefits of a corporate structure like this, without making mistakes that could create more than just headaches for the business owner.
Edmonton Bookkeeping | Bookkeeping For Holding Companies
Many entrepreneurs are not aware that there is any corporate structure other than having a corporation that they operate a business out of says Edmonton bookkeeping. However, there are many other corporate structures that business owners should know about because it could be very beneficial to them. For example, a holding company is a company that owns the operating company of the business. There are many benefits that business owners can enjoy from this structure and if they know about them, they will be more likely to structure their corporation this way and take advantage of these benefits.
One of the first things that an entrepreneur needs to understand, that the operating company is owned by the holding company and not the business owner. This makes the business owner be at armís-length from their own company, which produces an entrepreneur’s risk. Having a corporation in and of itself reduces the risk says Edmonton bookkeeping, however having a business owned by the holding company further reduces that risk. That can be extremely beneficial if an entrepreneur owns a risky business, or if one of their related companies is a risky business.
Since the sole purpose of holding company is to control the business, the benefits of having a holding company include being able to minimize taxes, concentrating assets, doing succession planning, having the flexibility to grow and develop the business. Holding companies make their money through profit shares, charging the operating company for management services, as well as buying and selling assets like buildings, real estate, and stocks.
One of the biggest benefits that an entrepreneur will have from utilizing a holding company as well as and operating company says Edmonton bookkeeping is tax minimize Asian. By being able to transfer funds between corporations completely tax-free can help a business owner minimize the taxes that they pay, and give accountants a mechanism to delay paying the entrepreneur especially if they have in overdrawn shareholders loan account. My understanding of these benefits, Edmonton bookkeeping says business owners can make the decision if they would rather pay for the additional corporate year ends that they must pay in order to utilize this corporate structure.
Once they decides to go ahead with this corporate structure, one of the things that business owners need to do is ensure that they are hiring a very capable Edmonton bookkeeping company. They have to keep very accurate track of all financial transactions and keep track of which corporation it should be through. This way, mistakes can be minimized and a business owner does not have to spend a lot of money on fixing the bookkeeping that should have been done properly in the first place if they were keeping an accurate record.
By understanding what holding company is, a business owner can discuss with their Edmonton bookkeeping company and their accountant which corporate structures most beneficial for them, and then they can use the most beneficial structure to grow their business and become successful.