Business owners when they are discussing their plans for business owners with their Edmonton bookkeeping company an accountant may hear about the possibility of setting up a limited liability company. They may be confused with this, thinking that this is the same thing as a corporation. Setting up a corporation can help limits an entrepreneur’s liability, but this is much different than what their accountant is talking about. Also known as a parent corporation, or a holding company not only use a business owner another layer of protection, but it can be beneficial for a variety of reasons. However, the business owner needs to understand that what this is, is setting up a corporation whose sole purpose is to own another corporation that operates a business.
There are many reasons why an accountant would recommend a business owner structure their business this way. Regardless of the reasons, business owners need to be very aware that there are many requirements that come with this type of corporate structure. Since both corporations will be their own separate and legal entities, Edmonton bookkeeping says that they need to keep separate books for each company, as well as file two separate corporate year ends.
In addition to keeping separate finances, a business owner must ensure that their Edmonton bookkeeping company is keeping track of the finances very carefully for each corporation and that they do so on a monthly basis. This will require a business owner to keep extremely good records, and communicating very well. By ensuring that there getting up-to-date financial statements on a monthly basis can help a business owner and up with the financials they need to make informed business decisions. By matching the transactions up every month, can help ensure the accuracy of the corporate year-end as well.
One reason why it is very important that the accuracy of the year-end financials, is because both years ends needs to balance with each other in order to be correct. This is much easier when both corporations and up with the same fiscal year-end says Edmonton bookkeeping. However, that is not always the case. Many accountants recommend entrepreneurs have a different corporate year-end date for each corporation, in order to give them a mechanism that will allow them to minimize the taxes that a business owner has to pay. Therefore, when the year ends are different, it is even more difficult to ensure that the year-endís balance with each other prior to filing them.
If business owner has decided to set up there corporate structure as a holding company holding their operating company, this can be very beneficial to them says Edmonton bookkeeping. However, they also must know what is involved with keeping the books and doing the corporate filing, so that they can do it correctly from the beginning of their business to avoid errors. However, once they know this, they can strategize with their accountant on different ways that they can minimize their tax, and to grow their business.
Edmonton Bookkeeping | What Is A Limited Liability Company
Business owners need to be aware of different corporate structures says Edmonton bookkeeping. The reason why, is because different structures can give them different benefits that they may want to explore. This is extremely beneficial if an entrepreneur is planning on owning more than one business, if they have a risky business, or if they are planning on buying and selling assets like real estate or stocks. By finding out all of the information related to how they can benefit can help an entrepreneur ensure that they are setting up their corporation in a way that is most beneficial for them.
The first thing that many business owners should understand is what the benefits are for utilizing a holding company, which is also called a limited liability company or a parent corporation. Since the purpose of a parent corporation is to control the business, an entrepreneur needs to understand how this can be beneficial to them.
One of the benefits that entrepreneurs can enjoy is reducing the risk involved in being a business owner. While corporations themselves limit a business ownerís liability, by utilizing a holding company, that holds the business can ensure that by not directly owning the operating company, further produces a business ownerís risk. This is extremely beneficial if they are in a risky business says Edmonton bookkeeping.
Another benefit is it can help a business owner plan with their Edmonton bookkeeping company an accountant on ways that they can minimize tax. There is a variety of ways, including transferring money between corporations and related companies. Since business owners often do everything possible to minimize the taxes that they have to pay, which is often why a lot of entrepreneurs go into business for themselves this is extremely important to take into consideration.
It is also a great structure for a business owner to have if they are going to be purchasing assets. With that utilizing a holding company, if an entrepreneur is going to purchase real estate, for example, they would buy it as part of their business. This means if something happens in the business must be shut down, that asset is put at risk. Also, Edmonton bookkeeping says that if business owners are going to sell their business, having an asset like real estate in their company might make it difficult to sell separately. Therefore, by using a holding company to purchase the asset, helps keep that separate from their business. And if they take on tenants, and charge rent, that money that they make can be filtered through the holding company instead of the operating business.
By understanding all of the business benefits they can enjoy from operating a holding company that owns the operating company, business owners can make the decision on whether that corporate structure is right for them so that they can see all the benefits that they expect from business ownership. They need to make this decision early on in their business, and then know what they need to do to ensure that they are keeping accurate records at all times.