There are many reasons why a business owner accountant might structure their corporation as a parent corporation or a limited liability corporation says Edmonton bookkeeping. But regardless of the reason why, entrepreneurs should understand that the only thing that really changes when they have a corporate structure this way, is how they must keep track of all of the transactions in their business. Their bookkeeper and accountants will take care of the rest.
The first thing that entrepreneurs need to be aware of, is that when they have a parent corporation or limited liability corporation, what that means is that the corporate structure is to corporations. They own the holding company that then owns shares in the operating company. There are several reasons why the accountant would structure a corporation this way. This is to protect the business owner if they have risky business, it can help an entrepreneur keep all of the assets separate from their business, it is to give them payment options on how to pay themselves. Whatever the reason, one on entrepreneur has a corporate structure like this, there are several things that give them the option to do.
When a business owner will business owner is arranging for the Edmonton beginner company to keep track of all of their bookkeeping for corporations, they need to understand that both corporations need to be treated like separate entities. That means they must get separate bookkeeping done, as well as separate fiscal year ends. It is really important for businesses to also understand that both corporations may not have the same fiscal year-end, which just as a layer of complexity to the monthly bookkeeping and the corporate year ends. Because of the complexity of doing the bookkeeping and the fiscal year ends, entrepreneurs need to be able to communicate with their Edmonton bookkeeping company very well. All transactions that they send to their bookkeeper to get booked, need to have notes on what it was for, and what corporation it needs to be applied to.
If business owners make an error or do not communicate with their Edmonton bookkeeping company about what transactions the should be put do, might end up their bookkeeper adding things incorrectly into the wrong corporation. For example, if the business owner sends their bookkeeper a deposit, the bookkeepers might assume that that should go onto the operating company, instead of the holding company. These errors are common if an entrepreneurís not communicating properly.
By understanding that this corporate structure does not change a lot for business owner, except they must be extra communicative, and that they are going to have two separate year ends, business owners can focus on ensuring that they have the most up-to-date and accurate financial statements for their business so that they can work on the strategic priorities of growing their business. When they do this, it is a matter of what kind of corporate structure they have, they will be able to operate a very successful business.
Edmonton Bookkeeping | Understanding The Corporate Structure Of Parent Companies
Business owners need to understand that there are several ways that they can structure their corporation says Edmonton bookkeeping. While the most common corporate structure is for a business owners to have a corporation that they own a certain percentage or hundred percent of the shares in, there also might be a corporate structure that has a business owner owning a corporation that owns shares in a corporation. This is called a parent corporation or limited liability. There is many reasons why an accountant would structure this for an entrepreneur. Therefore, if an entrepreneur has this type of corporation, they need to understand what they should do differently in their business to ensure that they are not making things difficult for their Edmonton bookkeeping company or their accountant.
When a not far has to corporations, it is very common that transfers of money are a way to help from one corporation to the other. There may be a variety of reasons for this including things like a business owner transferring money to their company in order to pay themselves. Since the business owner does not own the corporation that the business is operating out of, the corporate structure is that the business owner in the holding company will send the operating company an invoice for their management services. Then, the holding company will receive a transfer from the operating company. This is the sort of transaction that an entrepreneur needs to ensure that they are communicating with their Edmonton bookkeeping company about exactly what it was. If this type of transaction is not accounted for accurately, a bookkeeper might book it into the wrong corporation. Not only will this end up creating problems with the financial statements of the business, but if this mistake is not caught and fixed, it could create serious problems for the accountant trying to do the corporate year ends.
Another sort of mistake that is common during these intercompany transactions is that if an entrepreneur sends the expenses of the business to their Edmonton bookkeeping company, but do not tell their bookkeeper if they are the operating expenses of the operating company or the holding company. The bookkeeper might makes up which company it gets booked two, which can also create problems.
Ultimately, if an entrepreneur does not detail what payment is, the Edmonton bookkeeping company might throw it into the shareholder’s loan account, which would be extremely difficult to fix. Therefore, not only so that a notch been our can end up with accurate year-end financials, but so their Edmonton bookkeeping company can keep their financial statements accurate every month, they need to be very communicative with their bookkeeper. This way, they can end up with monthly financial statements that they can use in their business to make informed financial decisions about if they can spend money in their business or use money that they have to grow.
Ultimately, there are many different corporate structures that business owners do not necessarily need to be aware of until they find themselves in that situation. By understanding what they need to do can help ensure that they are keeping themselves organized so that their Edmonton bookkeeping company can do they do best, so they can send those financial statements to their accountant and and up with accurate financial records.