From a Single or Duo Ownership to Incorporation in QuickBooks

Posted by on May 30, 2012 in QuickBooks Tips | 0 comments

So you started out as a Proprietorship or Partnership and after several years your business has become so successful that your accountant has suggested it’s time to incorporate. This may due to a number of factors, but the amount of income tax you pay as a single entity in comparison to an incorporation, will be a key one.

Okay, now what do I do about the company file that I am currently using? Can I just carry on with it and change the name in the Quickbooks Company Information? No you will have to create a new company file, because of the following reasons.

– Most banking institutions will want you to open up a new account to handle the incorporation’s transactions.

– Your fiscal year will now change from a calendar year for Proprietorship’s and Partnerships to most likely one that revolves around your incorporation date. For example, if you incorporated on May 20, 2012 then you may chose your fiscal year as June 1, 2012 to May 31, 2013. Your accountant may also suggest that you have a short year for the first fiscal year.

– The ownership of the assets which include your fixed assets and accounts receivable, will also need to be decided on how to transfer them to the corporation especially if their value is material in nature.

– Your accounts payable vendors will have to be notified so that they are cognizant of the change in ownership structure.

– In Canada, at least in British Columbia, when you receive your incorporation documents you will also be assigned a new Business number which will also change your GST/HST and Payroll number.

– In creating this new company file, you can retain all of your QuickBooks Lists such as is displayed in the screenshot on your left. You will just need to know how to export them from your old company file and import them into your new company file. If you’re not sure make sure to contact your QuickBooks ProAdvisor.

– Most of the key lists will not import with any amounts in them, so you will need opening balances for all the Balance Sheet, Customer, Vendor and Employee names and accounts. If your running Inventory Control your Item List will export/import but you may have to Map its course.

– If you have Customer or Vendor Balances, I would keep the single entities bank account open, deposit the Customer payments into that account and pay off any Vendor outstanding balances.

– If this is not practical, due to the number of Customers with outstanding balances, then create opening balances for each Customer and Vendor in the new company, deposit those payments into the corporate bank account and carry on with the bookkeeping. You can use the single entity as your historical data as to which invoice is being paid.

If you are somewhere in the calendar year, I have a suggestion to do with your Employee earnings and deductions.

– If you can make the cutoff at the end of a month in your single entity, then I would just carry on with the payroll as if it was just starting at the beginning of the year for the incorporated company. At the end of the calendar year, you would print one T4 from the single entity and another from the incorporated company for the employees.  This solves the problem of having to enter in YTD figures for the employees in the incorporated company.

– In this new corporation company file you will need to change the Company Information making sure to properly identify the fiscal  year’s first month.

– Your Memorized Transaction List will not export/import so you will have to duplicate it manually.

– Your Equity section also changes along with the terminology, as your corporation will now have Common shares, Dividends and other accounts identified with corporations.

I believe I have covered most of what will be needed when you convert from a single entitiy to a corporation. Once again if you run into trouble, make sure to contact your QuickBooks ProAdvisor.

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