Typically, discussions about the importance of effective entity management center around how entity data impacts corporate legal and finance teams. While legal and finance both need access to robust tools to fulfill their respective roles within the organization, entity management also has a direct impact on a company’s tax function.
A well-designed entity management strategy that pairs established best practices with modern technologies will support the tax team and ensure compliance with state, federal, and international tax requirements.
By contrast, a subpar strategy can hinder your tax personnel and lead to regulatory headaches, fines, and unnecessary expenses. Why make things harder on yourself than you have to?
To help you avoid tax hassles, let’s examine several entity management musts from the perspective of your tax professionals.
Why Effective Entity Management Is Essential for Tax Purposes
Your tax team is tasked with navigating complex state, federal, and international laws. When a subsidiary operates across multiple jurisdictions, managing entity tax issues becomes increasingly challenging.
However, you can overcome these issues and support your tax team with a comprehensive entity management strategy. Designing an entity management strategy with your tax team in mind also helps you accomplish the following:
Support Compliance
Achieving compliance requires alignment between your tax, legal, and finance teams. A cohesive entity management strategy promotes collaboration between these departments and helps them access the information they need to complete regulatory filings, prepare tax documents, and meet established deadlines.
When you’re winning at entity management, your tax professionals will be able to access the financial and legal documents they need to complete essential forms.
They can exchange information with other departments, reference vital financial data, run reports, and meet state and federal submission deadlines so your organization can avoid fines.
Address Multi-Jurisdictional Tax Issues
Managing multiple entities requires your tax team to adhere to a variety of state, federal, and, at times, international tax laws. Between varying rates and misaligned filing deadlines, keeping up with all of these requirements can quickly become overwhelming.
Fortunately, pairing a robust entity management platform with a well-rounded strategy can provide your tax team with the necessary visibility to manage multi-jurisdictional tax issues. A well-equipped tax department can efficiently run conversion rates, track state and federal tax obligations, and ensure that payments are made on time.
Should your organization or one of its subsidiaries become the subject of an audit, your tax professionals will be able to provide auditors with the information they need to resolve any concerns quickly.
Assists with Managing Transfer Pricing
One of the most complex aspects of managing multiple entities is calculating and billing transfer prices. When one division or entity provides services or goods to another within your ecosystem, you need a way of tracking this allocation of resources. Otherwise, you’ll end up with inconsistencies on your balance sheets.
While managing transfer pricing is largely an accounting department function, the tax team plays a vital role in this duty as well.
That said, your tax professionals can’t adequately support transfer pricing management efforts unless they have access to up-to-date financial data via a centralized database. Adopting a unified entity management solution provides them with this access.
How to Support Tax Functions with Entity Management
If you want your tax team to be a valuable asset to your organization, you must have a solid entity management strategy in place.
While your exact entity management infrastructure should be tailored to align with your organization’s unique needs, you can follow a few general steps to support your tax team and make sure they’re set up for success.
Develop a Clear Framework
Building a clear framework for managing your subsidiaries facilitates better data management. In turn, your improved data management capabilities will ensure that your tax professionals have access to timely, accurate financial information for each entity.
Before you begin building your framework, get the executive team on board. With the support of the C-suite, you can create a subsidiary management framework that meets your legal, finance, and tax teams’ needs while simultaneously supporting the organization’s overall goals.
Define Each Department’s Roles and Responsibilities
Generally speaking, your tax, legal, and finance teams understand their roles within the organization. But do they also understand how they’re expected to collaborate with and support one another?
To facilitate better collaboration between tax, legal, and finance departments, make sure you clearly define each group’s roles and responsibilities. Also, reach out to your tax professionals and find out what level of support they need from the other departments.
Consolidate Your Data
While your tax team encounters a wide range of challenges when managing tax documents for multiple entities, one of the biggest hurdles they face is disparate data. Preparing and filing reports becomes unnecessarily difficult and time-consuming when financial and legal documents are scattered across multiple locations and files.
To eliminate this pain point, consider implementing an entity management solution that consolidates your tax data. When everything is stored in one centralized, secure location, your tax professionals can easily access the insights they need to fulfill their responsibilities without wasting valuable time or energy.
Adopt a Unified Entity Management Platform
Speaking of unifying your data, the best way to go about it is to implement a cloud-based entity management solution like Athennian, which empowers your tax, legal, and finance teams to operate more efficiently and support your compliance efforts.
Athennian moves all three of your core compliance departments to a single platform. By doing so, our solution promotes better collaboration between tax, finance, and legal. The three entities can share information, exchange documents over a secure platform, and work together to get more done.
Explore Athennian
Do you want to eliminate the hassles associated with entity management and, specifically, overseeing subsidiary tax processes? If so, take some time to explore Athennian, the leading cloud-based entity management solution for enterprise-level organizations.
To start your journey with Athennian, schedule your complimentary demo with one of our entity management experts. You can also take a product tour and explore the wide range of tools and features built into our platform.
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