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hmanzano
January 12, 2019
Question

Payments between sister companies

  • January 12, 2019
  • 2 replies
  • 0 views

Hello,

 

I own two companies (LLC) with separate books. Most of the time I have to use the employees from company A to help company B. Basically, subcontracting each other. I want company B to start paying back company A for this labor. How do I record this payment to company A? I was thinking on invoicing the other company but then it will show as revenue and I'm not sure if it is really a revenue for company A.

 

Please help.

 

P.S. I already have my due/to liability accounts for shared expenses and inter-company loans.

2 replies

Rustler
Rustler
January 12, 2019
@hmanzano wrote:

Hello,

 

I own two companies (LLC) with separate books. Most of the time I have to use the employees from company A to help company B. Basically, subcontracting each other. I want company B to start paying back company A for this labor. How do I record this payment to company A? I was thinking on invoicing the other company but then it will show as revenue and I'm not sure if it is really a revenue for company A.

 

Please help.

 

P.S. I already have my due/to liability accounts for shared expenses and inter-company loans.

so you want to have some portion of payroll expense, paid for by the other company.

 

Yes it is income, create a service item for that linked to the income of your choice (I would create one called something like payroll payback).  Use that item on an invoice to the other company.

 

On the P&L, income is reduced by expense, so the added payroll payback income will be offset by a portion of payroll expense.

 

ie.

Payroll payback = 12K

Payroll expense = 25K

 

actual expense that affect net profit and loss is 13K

qbteachmt
qbteachmt
January 12, 2019

It is Not Payroll Expense, if these people are not employed by the entity. What you described is called Worker Misclassification. You need to meet with your own CPA, before you get audited by the Feds, your State, your general insurer, and Worker Comp.

 

Here's what you described: I've got one entity absorbing costs for the Sales that are not theirs from the benefit of this labor. That's your "lending" entity, so the Taxes and Business reporting is wrong for this entity = labor costs are Overstated against its own Sales. I have another entity that benefits from Labor but never Hired these people, and they also are not independent subcontractors; I simply borrow them from my own other company, and that other company has the Employee and Payroll relationship and fiduciary responsibilities and employment-related issues. And now you want the One to pay the Other, but you are not a Contract Labor organization providing workers, such as a Temp Placement agency.

 

None of this is right; it's not right for any of the accounting.

 

What you likely really have is: All the people that work for Company A also are employees of Company B; I assign them to who they are working for and run the two businesses Separately and appropriately to these relationships.

    A
    Anibeth
    June 8, 2020

    Hello, I was wondering if you where able  to resolve this ? if yes , How? I have the same situation.

    L
    laperna1
    August 27, 2024

    I have a situation where one account of ours is floating money to another for a temporary safety net then back to the original account.  What is the proper way to classify a "loan" of this type when it's within the same company and temporary?  Since we just converted over to QB from Quicken, there are entries in as GL for these transfers I'd like to reclassify to a better GL account name than "miscellaneous".  Thanks! 

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