The rule, and the four reasons behind it
An EIN, or employer identification number, is the tax ID the IRS assigns to a business entity. One entity, one EIN, one tax return. That is the unit QuickBooks Online is built around: Intuit's own guidance is one subscription per company, and the switch-company menu is the only link between them.
The first reason is the tax return. Each entity files its own, and the preparer needs a balance sheet and a profit and loss for that entity alone, with opening balances that tie to last year. A class inside a shared file gives you a P&L split. It does not give you a balance sheet, so the second LLC's return is built by hand every year.
The second is the bank. Each LLC has its own account, and reconciling it means matching it against that entity's transactions only. In a shared file the question "is this LLC's cash right" has no report that answers it.
The third is partners. If the second LLC has an outside partner, that partner is entitled to that LLC's books and nothing else. One file means giving them everything or nothing.
The fourth is the separation itself. The LLC exists to keep one business's liabilities away from another's, and the books are the evidence that you treated them as separate. Advice on BiggerPockets to a landlord with several LLCs was blunt: each EIN should have its own file. That holds beyond real estate.
What classes and locations can and cannot do
A class in QuickBooks Online is a tag you can put on a transaction, or on each line of one, so that the profit and loss can be split by it. Classes are for product lines, departments or jobs inside one entity.
A location in QuickBooks Online is a tag that applies to a whole transaction, so that both the profit and loss and the balance sheet can be split by it. Locations are for physical units of the same entity, such as a second store with its own bank account.
Both need Plus or Advanced. Both split reports; neither creates a separate entity. A QuickBooks Community thread from March 2021 on classes versus locations turns on exactly this point: use location when the unit has its own bank account and you want a balance sheet by unit, class when you want profit by line within a unit, and neither for a different EIN.
| What you need | Class | Location | Separate file |
|---|---|---|---|
| Profit and loss by unit | Yes | Yes | Yes |
| Balance sheet by unit | No | Yes | Yes |
| Bank reconciliation by unit | No | Partly | Yes |
| Tax return for the unit | No | No | Yes |
| Partner sees only their entity | No | No | Yes |
| Monthly cost | Included in Plus | Included in Plus | $115 per file |
What separate files cost, and what the shortcut costs
Plus is $115 a month per company as of this writing. Four LLCs on Plus is $460 a month, $5,520 a year. One Plus file with four classes is $115. There is no US multi-company discount, so the shortcut is worth a real $4,140 a year, and we understand why owners take it.
Suppose you own a restaurant LLC that runs two locations under one EIN, a catering LLC with a 30% partner, and a property LLC that owns one of the buildings. The right setup is three files at $345 a month: the restaurant file with two locations, the catering file, and the property file. The catering partner gets a login to the catering file only. The property file has a balance sheet the lender can read.
Put all of that in one file with classes and it works for about eleven months. Then the CPA asks for the catering LLC's balance sheet, which does not exist, and the partner asks why the restaurant's payroll is in the file he can see. The bookkeeper spends January pulling twelve months of transactions apart by hand. NerdWallet puts bookkeeping clean-up at $1,000 and up, and a year of three entities' transactions is well past the floor. In our experience the subscription saving is gone by the second tax season, and the file never fully recovers.
There is also a quieter cost. Accountants often say classes are free, so tag everything. We would push back. Classes are cheap only if someone tags every transaction; untagged rows fall into a "Not specified" column, and the P&L by class is quietly wrong by whatever landed there. Locations, because they apply to the whole transaction, are harder to miss.
What you lose with separate files, and how to get it back
Separate files cost you the total. No report in QuickBooks Online adds three files together, and nothing cancels the rent the restaurant pays the property LLC before you sum the P&Ls. The four ways around that are in can QuickBooks Online consolidate multiple companies. A reporting layer reads every file and does the roll-up while the files stay separate underneath, which keeps the tax return, the bank and the partner happy at once.
The per-file rule has limits of its own. Three clean files do not tell you which company is making money once the money moving between them is taken out; that needs the intercompany canceled, which we explain in intercompany transactions explained for owners. And a class report, however tidy, cannot be reconciled to a bank statement.
Navigator reads each QuickBooks Online file read-only and shows a consolidated and per-entity view on the base plan, $299 a month for the first entity and half that for each additional one, without changing anything in the files. Intercompany elimination is on the Pro plan. If you are not sure your current files would stand up to a lender or a CPA, the free accounting health check is the place to start.
Which setup fits your situation
| Situation | Setup |
|---|---|
| Two stores, one LLC, one bank account | One file, two classes |
| Two stores, one LLC, a bank account each | One file, two locations |
| Two LLCs, same owner, no partners | Two files |
| Two LLCs, one has an outside partner | Two files; the partner logs into one |
| Operating LLC plus a property LLC that owns the building | Two files; record the rent in both |
| Four LLCs, each a rental property | Four files |
The table hides one judgment call. A second location that is legally the same entity but has its own manager, its own bank account and its own lender is close to being a separate business, and locations will carry it for a while; the day it takes on an outside partner or its own debt, it wants its own EIN and its own file. The rental case has its own wrinkles, covered in one LLC per rental property. Franchisees with several units under one entity are the strongest case for locations, and the number that matters there is in 4-wall EBITDA for franchisees.
The mistakes we see most
Classes used for different EINs is the big one, usually discovered at tax time. The CPA asks for the second LLC's balance sheet, finds a P&L by class and a single bank balance, and builds the return from a spreadsheet, and the same spreadsheet has to be built again the following year because the file still cannot produce it. The second is one bank account feeding two entities, which makes even separate files hard to reconcile; every deposit that belongs to the other company has to be pulled out by hand before the statement will match, and the bookkeeper usually parks the leftovers in an account nobody can explain later. The third is using both classes and locations for the same thing, so half the transactions are tagged one way and half the other, and neither report is complete. The fourth is assuming a file can be split later for free. It can be split. It gets more expensive every month, because the cut-off moves and the history behind it grows.
Questions owners ask
Can I use one QuickBooks Online subscription for two businesses?
Only if they are one legal entity, meaning one EIN and one tax return. Two locations of the same LLC can share a file with classes or locations. Two LLCs cannot, without leaving one of them with no balance sheet of its own. Intuit's guidance is one subscription per company, billed separately.
Is there a QuickBooks Online discount for multiple companies?
Not in the US as of this writing. Intuit has run multi-file offers in other countries and left the US out. Each file pays list price for its plan, so four companies on Plus is four times $115 a month. Ask your accountant whether their firm pricing helps, but do not build the decision around a discount.
What is the difference between class and location tracking in QuickBooks Online?
A class can be set on each line of a transaction and splits the profit and loss. A location applies to the whole transaction and can split both the profit and loss and the balance sheet. Both need Plus or Advanced. Use location for a physical unit with its own bank account, class for a product line or department.
Can I move a company from classes to its own file later?
Yes, but it is a project, not a setting. You open a new file, enter opening balances as of a cut-off date, and rebuild history only if you need it. Everything before the cut-off stays in the old file. The longer two entities share a file, the more there is to pull apart, so earlier is cheaper.
Related
Once the files are separate, the question is how to see them together, which is the subject of can QuickBooks Online consolidate multiple companies. Landlords with an LLC per building should read one LLC per rental property. If the money between your entities is already tangled, intercompany transactions explained for owners shows the entries that untangle it.
If you would like a second opinion on whether your files are set up the way a CPA or a lender would expect, the accounting health check is free: navigatorhq.ai/health-check.
Published . Last updated . Reviewed by a CFO on the Navigator team.