How to manage multiple entities in accounting software?

Each legal entity should have its own set of financial records. This is a legal and tax requirement in most jurisdictions. Using a platform that supports multiple companies under one subscription makes this manageable - you switch between entities rather than using entirely different software.

Mixing the finances of multiple legal entities in a single set of books - known as comingling - creates serious legal and tax problems. If your holding company and trading company share one set of books, it is impossible to determine the tax liability of each entity separately. In the event of a legal dispute, comingled accounts also undermine the liability protection that separate legal entities are supposed to provide.

When Entity A pays an expense on behalf of Entity B, an intercompany transaction needs to be recorded. These transactions must cancel out at the consolidated group level. This is where specialized multi-entity tools like NetSuite and Sage Intacct shine - they automate intercompany eliminations.

A common intercompany scenario is a parent company paying shared costs - insurance, IT infrastructure, professional services - and recharging a portion to each subsidiary. Each recharge needs to be recorded as income in the parent and an expense in the subsidiary. At consolidation, these cancel out. Getting the accounting right on intercompany transactions is one of the most common areas where groups need accountant guidance.

Note.now currently supports separate accounts for each company and allows easy switching between them. For businesses needing full automated consolidation with intercompany elimination, tools like NetSuite or Sage Intacct are more appropriate. Note.now is working on enhanced multi-entity features for growing business groups.

For groups with two or three entities that consolidate manually, Note.now handles each entity's books excellently and the consolidation can be done in a spreadsheet using exported data. This approach works well until the number of entities or the volume of intercompany transactions makes manual consolidation impractical.