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Many entrepreneurs do not understand that there can be different corporate structures until they set up a meeting with their Edmonton bookkeeping company and discover that they own holding company that owns and operating company. There are many reasons why a business ownerís accountant would recommend they do that as their corporate structure. Ultimately, once an entrepreneur has this as their corporate structure, they do not need to worry, they just need to be careful about how they keep their records and communicate with their bookkeeper.

The first thing that entrepreneurs should know when they own and a company that owns and operating company is what holding company is. Edmonton bookkeeping says that holding company is a corporation that actually opens another corporation. That corporation has a stake in the company. That means that not nor does not own the company that they are operating, but they own the holding company instead. This is a slightly different structure, and because they do not actually own the business that the holding company holds, they get paid through the holding company by the holding company charging the operating company management fee.

The next thing that entrepreneurs should know about holding and operating companies is that there is something called an intercompany transaction. These transactions say Edmonton bookkeeping are any time transactions happened between holding and operating companies. Not only this but any time a transaction happens between any related companies. A related company is when the spouse or director of a business owner of a corporation also owns at least 5% shares in a different corporation. Those two different corporations will end up being related companies. For example, if a business owner owns a corporation, and their spouse who is not a director owns 25% shares of a different corporation, to corporations become related. Any transactions between those two companies are also called intercompany transactions.

The next thing that should understand, is that they need to be very careful in keeping a record of all of the transactions that happen in the business. For example, if a business owner sends their bookkeeper a deposit, their Edmonton bookkeeping company might assume that it is profit for the operating company. If that is not the case, not only does it cause problems for both corporations, but it also can be very difficult to find and fix. Therefore, entrepreneurs need to ensure that they are communicating very clearly with their Edmonton bookkeeping company and explaining what all transactions are.

Ultimately, business owners need to understand that there to corporations may or may not have the same fiscal year-end, and if they do or not, they need to ensure that there keeping accurate records every month, so that not nor can they end up with the most accurate financial statements possible. They can use these financial statements to make informed financial decisions in their business is going to allow them to grow their corporation and succeed in business.

Edmonton Bookkeeping | What Entrepreneurs Should Know About Holding Companies

There are many reasons why an accountant would recommend business owners structure their corporation as a holding company holding and operating company says Edmonton bookkeeping. Adamantly, there may be several reasons including protecting a business owner especially if they own a risky business, or giving tax-free dividends to not nor, even giving a business owner flexibility in choosing how they are going to pay themselves is made possible with this type of corporate structure.

Another benefit of this corporate structure is that a business owner may choose to purchase assets in their holding company rather than they are an operating company. The reason why this might be preferred is because if an entrepreneur chooses to own the building that they operate out of. If they have a holding company, they can purchase the asset in the holding company instead of the operating company. That way, if an entrepreneur decides to sell their business, that does not include the building. Giving them a different stream of income. Also, if something happens to the business and it needs to be shut down, all of the assets that an entrepreneur opens in their holding company will not be included in the shutdown of their operating company. This can help protect a business owner, as well as their assets.

Ultimately, when an entrepreneur owns a holding company that owns an operating company, they do not own the operating company, and they must charge that operating company a management fee for their management of the company. That is how they can get paid through this corporate structure. This can protect a business owner, and give them options on how to pay themselves to minimize taxes.

The most important thing for entrepreneurs to keep in mind when they have a corporate structure like this, is that they need to keep their records very separate and very organized for their Edmonton bookkeeping company. That way, if there is that misclassification, or if an entrepreneur has sent the expenses of the business and it gets applied to the holding company instead of the operating company, it can cause an Edmonton bookkeeping company to have the incorrect financial statements.

Not only do accurate financial statements help business owners make financial decisions in their business, but the keeper’s goal should be to match corporations with all transactions every single month. Not just so that an entrepreneur can end up with the most accurate financial statements, but so that when they get to the end of their year, the corporate year-endís for both corporations can be done quickly and accurately as well.

Regardless of how or why the corporate structure of a business would be a holding company and an operating company, it is important that a business owner is prepared and communicates effectively with their Edmonton bookkeeping company to ensure that all transactions are classified properly, no mistakes are made, and that they can end up with accurate financial statements that are going to be able to use in their business to grow their company and become even more successful.