Pros and Cons of Multiple Legal Entities vs Financial Dimensions

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Posted on by 72camaross

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Hey Everyone,

I am new to the Legal Entity setup piece of FnO and have questions regarding various options when working with multiple companies under the same umbrella.

The situation is having 11 Companies/Legal Entities (in the real world) but trying to simplify this within the system. I am looking at creating 2 Legal entities and then using Business Units as financial dimensions for the rest of the companies.

- 1 legal entity in D365 for the USD companies and 5 Business units and 1 legal entity in D365 for the CAD companies and 6 business units and then have a roll-up consolidation company. OR

- 11 legal entities in d365

I know this would affect 1099s, Taxes but I'm not 100% sure how. Also, how does this affect the AP clerk who needs to put in the intercompany transactions?

Can I get your feedback on what the differences look like when it comes to purchasing, budgeting, banking, taxes, 1099s, vendors, etc? Pros and Cons of each setup? I'm sure I am missing something but that is why I am here. I do not want to miss a critical piece that can't be fixed once a path is chosen.

Thanks

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saurabh bharti 15,045 Moderator on at

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In my opinion , you need to look at legal perspective, do all companies legally exists then i would suggest to go with multiple legal entities.

If it just about reporting then you can think of financial dimensions. (Also, keep in mind later on you might have challenge in defining security role because restricting users from business unit to another might become quite difficult)

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Morgan Bazin 95 on at

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To add to Saurabh's response:

You'll want to keep the legal entities separate because of legal and accounting requirements. You might be able to replicate all the functionality using a financial dimension, but I believe there's greater risk of error using that route, and I think you'll have a very difficult time when it comes to processing intercompany eliminations as part of the consolidation.

Verify the legal structure of the organization and ask your finance department/auditors - they will offer guidance as well.

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