Many entrepreneurs understand that corporations limit their liability in business says Edmonton bookkeeping. However, by utilizing the Edmonton company to own their business gives them another layer of protection. This is often called a parent company or a limited liability company. There are many reasons why an accountant might recommend a business owner utilize this corporate structure in their business, but if this is how their corporation is set up, business owners need to understand how their business is different, and what they need to do to ensure that they are managing them properly.
One of the first things that business owners need to understand is if they are using a parent corporation, their holding company and their operating company need to file two separate year ends because both corporations are their own separate legal entities. They should ask their accountant and their Edmonton bookkeeping company for their advice when deciding when the corporate year ends should be for each corporation. While it might be tempting to have the year ends be at the same time so that they can ensure that each corporation balances with each other before filing. However, there are tax benefits that business owners can utilize if they have both corporations have different times of the year for their year-end.
By having separate filing for each corporation, Edmonton bookkeeping says that business owners also need to understand that that means they need to have a separate GST account and a separate payroll account as well. A business only needs to have a GST account if they are making over thirty thousand dollars a year, so if the holding company is making less than that, a business owner will have to worry. But if they start making more than that, they will need to file for and get their own GST number.
One of the reasons why a business owner would want to consider using a holding company is if they are going to own more than one business, or if they are going to open assets such as buildings or stocks. By purchasing those assets in the holding company, legally separates them from the business owners operating the business. If a business owner decides to sell their business, they can keep all of the assets in their holding company separate from that sale, which can help them keep those assets, or sell them separately for more money. This can also give a layer of protection in case a business owner’s operating company is struggling, and they want to shut the company down without affecting those assets this structure gives them the ability to do so.
A business owner should be aware of all of the benefits of setting up a parent company to own their corporation. Most of these benefits can outweigh the cost of creating two different corporate year ends, but in order for a business owner to be okay with this they need to understand what benefits they are getting from their holding company. By doing this, they have much more control over their business, and how they can grow and succeed.
Edmonton Bookkeeping | Minimizing Risks With Holding Companies
When business owners have a holding company set up to own their corporation, there are many reasons why they would do this says Edmonton bookkeeping. While it gives business owners a layer of protection, many business owners understand that having a corporation itself limits their liability, so they are not sure how would be beneficial to them. Therefore, helping business owners understand the benefits of a holding company can help ensure that they make the decision that is most beneficial to them, their business and their family.
How the operating company and holding company is set up is like this says Edmonton bookkeeping: the holding company owns a stake in the operating company. The business owner owns a holding company, but not the operating company. Therefore, a business owner is kept at armís-length from their operating company giving a lot of flexibility not just with what they can do tax-wise, but with their assets, profit share, by and selling assets as well as paying themselves.
By using a holding company, a business owner can add other corporations, or assets very easily says Edmonton bookkeeping. By having them owned by the holding company, means that an entrepreneur can treat each one as its own separate legal entity. This way, if problems occur in one, it does not affect others. This can help entrepreneurs by more businesses, and sell them off retaining profits in their holding company.
When an entrepreneur has decided to purchase and assets such as land, or if they are choosing to buy a building, having the holding company purchase that asset can help ensure it is kept separately from their businesses. If they do not have a link company, just a corporation and they buy a building, if they sell that business, that building will technically be a part of the business. The leather has to set up an agreement to sell the business without the building, or they may end up having to sell them together, which might be a problem if the business owner had two different buyers, or was planning on keeping the asset themselves. By having a holding company, gives a business owner a lot more choice on how they are going to manage their businesses and assets independently of each other.
It is also very important for business owners to understand that inter-company transfers are actually tax-free in Canada until the dividends are issued to the business owner. Therefore, a business owner, their Edmonton bookkeeping company and their accountant can make plans on how to move money around their corporations to minimize taxes, get around an overdrawn shareholder loan account, and pay a business owner. This tax minimizing is so important, that it is often the sole reason why many business owners choose to set the corporate structure up this way.
By understanding the benefits of using a holding company can help entrepreneurs make the decision that right for them and their business. By becoming educated can help business owners ensure that they are operating their business as efficiently and effectively as possible, and taking advantage of everything that is available to business owners.