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Q-1:

Subject: Quickbooks per business?

 

On your website you recommend keeping a single Quickbooks file for each taxable business. How should disregarded entities with their own bank and credit accounts be reflected on the books?

I should think it would be desirable to run reports showing only that entities activities. Not just because you want to know if it’s making a profit by itself, but because you want to avoid a colorable claim by a creditor that since you didn’t keep separate (or at least *separable*) books they should be able to levy on the assets of the parent to satisfy a judgment against the subsidiary. “Entity formalities” and all that…

A-1:

It really depends on which kind of disregarded entity is involved.  For a single member LLC, which I assume you are referring to, you have some very good points and a separate QB file would be an excellent idea.

However, for  the most common type of disregarded entity, Living (aka Revocable) Trusts, there is no need to have a separate QB file because everything is treated essentially the same as being owned directly as an individual.

Your tax and legal advisors should be able to help you determine when a separate QB file is required.

Kerry Kerstetter

Q-2:

If you keep a separate QB file for the SMLLC subsidiary, how do you merge (for tax purposes) the books come tax time?

A-2:

While you could use one of the QB consolidation utilities that are available, the easier approach is to enter the details from the SMLLC onto the appropriate schedule of the 1040 or LLC and then just make a journal entry on the main entity’s QB file to show the SMLLC’s net income or loss for the year.

Kerry