Best Bookkeeping Practices
In the normal course of providing our Compliance Management Service for our amazing Clients we have observed that some client staff members are sometimes uncertain how to maintain a strong corporate veil.
As a professional business owner, you rely heavily on your staff to transact day-to-day business operations. If staff is unaware of the most common pitfalls of corporate governance, this could lead to business activities in your office that could weaken your corporate veil.
For example, we recently spoke to a bookkeeper for one of our clients. This client has two separate business entities enrolled in our Compliance Management Service. The bookkeeper called to inquire if she could pay for both enrollments with one check. While we understand that paying for products or services with two separate checks might appear to be unnecessary, and that one check for both entities might be easier, in this particular case it would be unwise for a couple of reasons.
First, each company should be maintaining it separate set of financial records to comply with state and federal requirements and to avoid overlap.
Second, because of the requirement for separation mentioned above, the bookkeeper would actually create more work for herself in the long run because of the adjusting entries that will eventually be required on each companies set of books.
To establish and maintain a strong corporate veil of liability protection around your personal assets, each of your business entity’s assets should be segregated. Commingling and overlapping of assets are common mistakes that open the door to veil piercing lawsuits by weakening your corporate veil. In this example, although slightly more inconvenient, our recommendation to the bookkeeper was to pay for each enrollment from each company’s separate checking account. For more information on this subject please refer to Whitepaper #2 ~ Overlap, A Big Problem for Owners of Multiple Businesses.
Additionally, we recommend you take time in an upcoming staff meeting to explain the importance of our service to your staff so they too can help you maintain a strong corporate veil.
If we can be of service to your staff or new employees in this regard, please give us a call. In this example, our Client is fortunate to have a wise bookkeeper who took the time to call our hotline with her question.
As always, it is our pleasure to serve you.
Corporate Assistance LLC is not a law firm . Material discussed is meant for general illustration and/or information purposes only and is not to be construed as tax or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. If legal advice is needed, consult your attorney.