With the exception of sole proprietorships, all business forms are considered entities, and entity management simply describes the practice of efficiently managing the company’s important data and documents to ensure compliance at all times.
While it is of course possible to manage your own business systems, many organizations find it easier to use the services of an entity management provider – especially when they have multiple subsidiaries – and a good one will aim to accomplish the following three things:
- Manage and keep a company compliant with all international, federal, state and local requirements
- Effectively manage data, documents, compliance, communication, collaboration and reporting for all company entities
- Provide secure access to entity records to internal and external parties to create transparency
Helping to keep a company compliant, an entity management firm will make sure that all important documents and deadlines are tracked right across the company and all of its subsidiaries. Businesses that are growing, or plan to expand, benefit from sound entity management as their needs become larger and more complex.
How a centralized database can help a business
When a business has an efficient entity management system, it will typically have a central repository of information to better manage its data and documents, and in doing so, achieve a more complete and holistic view of all its entity information. A centralized database also provides secure access to the records.
Why do businesses have more than one subsidiary?
There are 3 main reasons why organizations choose multiple subsidiaries:
- To separate and manage liabilities and exposure
This is perhaps the most common reason for an organization to establish multiple subsidiaries; should the organization face any kind of litigation, it can help ensure that the liability doesn’t stretch to other entities, protecting its assets in the process.
- Minimize tax burden
Different entity structures have different tax requirements and consequences, and having more than one entity enables the organization to select the structure that best suits its tax needs.
- Alleviate or address regulatory considerations
Selling, spinning-off or liquidating entities as and when required, is made possible with multiple subsidiaries, and in certain industries that are heavily regulated, subsidiaries are established to hold specific licenses.
Why is effective entity management so important?
Providing organizations with simple, secure access to accurate and complete records, helping them meet increasingly complex regulations, and international, state, county and local filing requirements, entity management is vital in today’s marketplace.
If your organization is struggling to keep on top of constantly changing laws and regulations, you could benefit from hiring an entity management firm to help you stay compliant when crossing jurisdictional lines. For more detailed advice and guidance, reach out to an entity management firm today.