USA Intercompany transactions


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Our company was set up as an Inc but then added a wholly owned subsidiary as an LLC. The billing was done under the Inc but is now done from the LLC. The Inc and the LLC have two different bank accounts. We received a payment from a customer in the Inc bank account for an invoice that was sent from the LLC's quickbooks (the customer had old wire info). How do i apply the payment on the LLC if the funds are in the Inc AND, do i actually need to move the cash? This is not money due back to the Inc, it never should have gone to the Inc in the first place.
 
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kirby

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Expect that this will happen a lot. As your subject line indicates, this is now an intercompany transaction. So In your LLC you can post
DR Due from Inc
CR Accts Receivable
and that relieves the A/R but the money is still in Inc.

By the way, when Inc received the money it should have posted
DR Cash
Cr Due to LLC

I suggest you then settle the interco acct monthy, by a payment to put the cash into the company where it belongs.
 
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Thanks! Are you saying the funds need to actually move from the Inc bank account to the LLC bank account?
 

kirby

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Yes, I suggested you settle (pay) monthly but at least do so periodically. Avoids IRS from claiming that unsettled intercompany accounts are actually loans and interest should be recorded.
 
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Assuming our customers pay to the correct bank account, the LLC account will continue to receive funds but will have no operating expenses. When we move the funds from the LLC to the Inc where all the actual operating costs are, how do we do that without it looking like a loan?
 
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kirby

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When there are two related companies and Co A has all the payroll and expenses, consider having Company A bill company B for Co B's share of expenses. That will balance out the holding of cash. Make sure it is a written agreement signed by officials of both companies.
 
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