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Accounting Structure for Separate Legal Entities

Leslie Mendel's Profile

At my new company, each location is a separate LLC for legal liability reasons. Currently, each location is a separate company in our accounting system for which we file a consolidated tax return. This accounting structure necessitates excessive labor. Could we restructure and set-up each location as a class/location/division within one company and not lose the limited liability benefits of our legal structure?

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

The key is to maintain an "arms length." I was involved in a structure with 30 joint venture companies that used one central Accounting back office which I managed. The central Accounting was part of a set of services that the joint ventures used from one central company. For that we received a Management Fee.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Leslie,

If I read your phrase "set-up each location as a class/location/division within one company" right, the challenge you may face is that the Retained Earnings account would at that 'company level and you would have to manage each subsidiary's legal retained earnings manually (may be relevant if you sell off any location). That can be a real pain.

It gets further complicated if any subsidiary has different shareholders (sometimes the location has its founder/doctors as minority shareholders). That means you need your consolidation module/package to handle minority interests for you.

Choosing the right software to handle the centralized processes, as Regis identifies above, helps reduce the duplicated effort. And standardizing those processes for the locations is key to making it work.

Regards
Len

Leslie Mendel
Title: CFO
Company: Surgical Anesthesia Services & Surgical ..
(CFO, Surgical Anesthesia Services & Surgical Synergies) |

Great points Len. To clarify, currently all locations are owned by the same equity group with no minority interests, and retained earnings could be maintained at the Company level (locations are contracts not actual physical locations). In the future, we may have partial equity interests; thus, I would also be interested in software suggestions. We currently use QuickBooks Enterprise which is very cumbersome. I have been researching NetSuite and am open to suggestions.

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