It is actually important if entrepreneurs have a thing company and an operating company to be careful when taking care of the bookkeeping and accounting says Edmonton bookkeeping. The reason why, is because if they mix up the two companies at any point, they could end up having year ends that do not match, and creating a hold of other problems.
The first thing that entrepreneurs need to understand is what a holding company is.: The company is a corporation that opens another corporation. It has a stake in that company that gives the business owners a layer of protection. Holding company is also called a parent corporation or a limited liability company.
Once an entrepreneur understands what a holding company is, the next thing they need to understand is what intercompany transactions are. This is what it is called when transactions are happening between holding and an operating company. This could be paying fees, running payroll, are a variety of other transactions. Also, if a business owner owns more than one corporation or their spouse owns shares in another corporation, those companies become related, and intercompany transactions can happen between those corporations as well.
If business owners are not careful when they are doing the bookkeeping and accounting for their holding company and operating company, it can be very easy to make mistakes. For example, if a business owner sends of deposits to the bookkeeper and they make the assumption that it is a deposit that should go in the operating company, but instead, it should be considered a transfer between the holding company and the operating company, that not only will cause the operating company to have too much revenue which will end up in an entrepreneur paying more taxes, but it will also end up with both companies not having matching year ends. Is very important when an entrepreneur sending their information to their Edmonton bookkeeping company, that they are being very clear about what deposits should be applied to which company.
Ultimately, Edmonton bookkeeping says that these companies while they are related, they should be treated separately. Not only will they have separate year ends, it will also have separate GST and payroll accounts if necessary. Therefore, entrepreneurs need to be sure that there keeping track of all transactions very carefully in order to end up with accurate year ends in their business.
When entrepreneurs have an operating company and a holding company, there are several things that they can do to ensure that there keeping track of all the transactions between the businesses, so that they can end up with the most accurate year-end possible. Not only should they be very careful when sending information to their accountant and bookkeeper, but also keeping all records to make the year ends go smoothly is an important way they can ensure that the year ends for both corporations end up accurately and that they both end up matching each other as well.
Edmonton Bookkeeping | Intercompany Transactions Between Small Businesses
While not all corporations are set up with a holdi company and an operating company says Edmonton bookkeeping, this is the reality for many businesses. This can be a struggle, especially with 82% of entrepreneurs who took Intuitís financial literacy test score less than 70%. Many entrepreneurs struggle with understanding basic business financing, and it can be difficult enough with one corporation, that if they are not careful if they have a holding company and an operating company, they can end up with lots of mistakes. Therefore, it is very important that entrepreneurs learn what they have to do in order to ensure that they are keeping track of all the transactions in both corporations carefully.
One of the first things that a business owner needs to do, ensures that which Edmonton bookkeeping company they use, they are communicating with very carefully. Bookkeeping errors are common with intercompany transactions, especially if the business owner does not inform their bookkeeper what corporation should receive each transaction. Therefore, keeping very accurate and separate records is an important factor when a business owner has an operating company as well as a holding company.
There are frequent mistakes that happen with intercompany bank transfers if business owners are not careful. One of the most common mistakes is when the Edmonton bookkeeping company that is working on it thinks that the intercompany bank transfer is actually a deposit. Another common mistake is when a transaction gets misclassified, and ends up in the operating company when it should be in the holding company or vice versa. Another common error is when the expenses of the operating company in the holding company are big step. And lastly, having a bookkeeper believes that the deposit is actually a shareholder loan. All of these mistakes are common when a company has two corporations, and they are not careful with their record-keeping.
Ultimately, the goal of an Edmonton bookkeeping company will be to ensure that all transactions are matched for companies of the time every month. When a business owner ensures that their bookkeeper matches all of those transactions, it will reduce errors, especially when it comes to doing the year ends. When a business owner has the files over to their accountant, but having everything matched up ahead of time will make the job a lot simpler for the accountant.
One more thing that entrepreneurs should keep in mind is that both corporations might have very different filing deadlines, so that should factor in when they are getting bookkeeping and accounting done. If one corporation has a year-end ahead of the other, it can cause problems trying to match everything up at the end of one corporation’s year. Therefore, by being organized entrepreneurs can ensure that their records are kept accurate and that their Edmonton bookkeeping company will be able to and up with the year ends balancing, even if the year ends are not the same time.
There are many things that business owners should take into consideration if they own two corporations that will help them keep their financial records straight, so that they can focus on what is truly the most important thing to work on.