Hi I had a new question as we discussed one of our LLCs
and now I want to check the accounting
for the other one.
As we discussed before, the US
LLC owns 2 LLCs, one which makes the software
lets call it Europe2 LLC.
How is the money the US LLC sends to pay Europe2 LLC expenses to be accounted?
Europe2 LLC writes the code that forms
the basis of the product sold by the US LLC and the Europe1 LLC.
Europe2 has no revenue other than the money sent from the US office.
Before Europe2 was formed, expenses were paid directly to contractors, etc.
Now, Europe2 sends a monthly statement listing expenses requesting payment to the Europe2 office to cover those expenses.
The US office makes payments to the Europe2 office when its convenient in large transfers.
Europe2 is accounting for the money the US LLC sends them as income
Europe2 does a P&L which includes asset depreciation
, expenses and income
from the US office which is then included on the US income statement.
How is this situation normally handled where a US company owns a development center-that
just has expenses and no sales
Should the US be recording this as buying something from Europe2
like purchasing the software product at a given price from them or its okay to think
of it as paying the expenses?