Business owners may not understand why their accountant would set up a holding company for them says Edmonton bookkeeping. They may wonder if this is absolutely necessary, because not only does this require them to have to keep more accurate financial records, but it also means they have to pay for to corporate year ends, which can end up costing more money, and creating problems if these year ends do not match up to each other.
One thing that needs to be kept in mind if a business owner has a holding company and an operating company is that not only do these corporations need to have their books balance at the end of their fiscal year, but Edmonton bookkeeping says they also need to balance with each other. This is difficult if a business owner is not keeping accurate financial records. Also, if the corporations do not end up with the same fiscal year-end, that can add a layer of difficulty to the task. Although there are a lot of benefits that can come out of a holding company and an operating company having different year ends, but in order to take advantage of these benefits, business owners need to ensure that they are keeping track of their finances properly.
One of the recommendations from Edmonton bookkeeping is for business owners to ensure that all transactions for both corporations are matched every single month all of the time. This way, not only does that minimize errors on a monthly basis, ensuring that a business owner has the most up-to-date balance sheet and income statement in order to make financial decisions. But also, this can help ensure the accuracy of the year ends for each corporation. This is especially vital if they have separate year ends, in order to ensure they balance each other even when the year ends her not at the same time.
There are so many mistakes that could be made very easily if an business owner is not keeping track of all of their business finances. Not only do they need to keep track of their finances as any other business owner would, but with two corporations, and entrepreneur needs to ensure that there keeping track of each transaction for each corporation as well. It can become very easy for mistakes to be made, such as mixing up which corporation expenses should get posted to, having an Edmonton bookkeeping company thinking that deposits should be revenue of the operating company, and misclassified shareholders loan accounts.
By understanding how holding company and operating company corporate structures are different, can help a business owner ensure that there keeping accurate records. This way, a business owner can to get vantage of all the tax benefits that ultimately come when utilizing this kind of corporate structure in their business. But in order to get the benefits from the tax structure, a business owner must also be keeping accurate financial records at all times.
Edmonton Bookkeeping | Utilizing Holding Companies
If a business owner has been talking to their accountant to recommends utilizing a holding company, Edmonton bookkeeping says that many business owners decline this type of corporate structure because they do not want to have to pay for two years ends. However, there are many benefits that business owners can get from this type of corporate structure that they need to understand prior to making the decision to utilize this method or not in their business.
There are a lot of reasons why business owners would choose to have a holding company that owns the operating company says Edmonton bookkeeping. One of the most common reasons is if a business owner is planning on purchasing assets that they want to keep separate from their business, or if they are planning on owning more than one company. However, that is not the only reason why a business owner should consider the holding company structure.
Another reason why a business owner should consider utilizing the holding company structure is in order to give the business owner a layer of protection. Even though the function of a corporation is to limit liability, a business owner can further protect themselves by utilizing parent corporations. By not directly owning the operating company, gives their business owner a degree of shelter that is beneficial.
One of the other reasons why an accountant might recommend that an entrepreneur uses a holding company is so that they can minimize their taxes. One of the ways that this is Dunnís is ten bookkeeping is through transferring money between holding company and the operating company. This can be done tax-free until those dividends are issued from the holding company to the business owner. By allowing a business owner to flow income tax free, as well as getting a business owner the mechanism needed to delay paying themselves if they end up with in overdrawn shareholders loan account are some of the most compelling reasons that an accountant would recommend an entrepreneur use this type of corporate structure.
Ultimately, Edmonton bookkeeping says that by utilizing a corporation to hold and operating company, if a business owner purchases or opens more businesses, the holding company can hold more than one corporation so that they can be treated independently from each other. Also, if a business owner decides to purchase assets such as the building that they are operating in, if they decide to sell their business, that means that they can keep the building, and charge rent instead of having to sell the building as part of the business.
By understanding all of the benefits to holding company, Edmonton bookkeeping says that business owners can decide if they want to go to the trouble and the expense of filing to year ends. By making this decision, business owners should learn what they need to know in order to keep the most accurate financial records to be able to do this easily and accurately as possible.