This article deals with if you are in a scenario where you are an entrepreneur and have two small business entities to maintain the bookkeeping for.

This is a rather common scenario and it is vital that you, as the owner of both of these small businesses, understand simple do’s and don’ts when it comes to maintaining basic ethics and integrity within both sets of books.

Typically, what I have seen, is one small business has been in existence for quite some time; then some years later, for reasons which are beyond the scope of this article, the entrepreneur will decide to create another official separate business entity and thus now is responsible for the bookkeeping here as well. Since this new entity will probably need some sort of start-up capital and perhaps some ongoing contributed capital as well, it is important for you, as the entrepreneur, to not get too carried away with the financial relationship between both of your companies.

If any contributed capital for the new company is going to come directly from the old company, I would highly recommend you obtain advice from a C.P.A. first. Typically, what I have seen is the following accounts are created for this scenario:

• Current Asset account called “Due To/From New Company” is created in the Old Company’s books.
• Current Liability account called “Due To/From Old Company” is created in the New Company’s books.

The goal here is: If the Old Company contributes capital to the New Company, these accounts will track this in both sets of books. Then, later on, the New Company can pay back the Old Company here when it becomes financially feasible to do this. You will want to obtain advice from a C.P.A. regarding any possible interest-bearing obligations in this loan-type scenario.

Overall, contributed capital into the new company should be in the form of an even cash deposit (such as $5000) and NOT in the form of the old company paying the new company’s vendor bills and credit card payments.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.