We have run multiple sister companies with overlapping general ledgers and shared employees. How do we cleanly untangle these financials on our exit runway so a buyer sees a single, audited operating entity?

Question

Tyler Smith · Accepted Answer

Shared resources and overlapping ledgers are a massive red flag that will halt due diligence in its tracks. To an external buyer, shared books look like a shell game designed to hide expenses or inflate profitability. You must begin untangling these entities at least two years before you plan to go to market.

Start by separating your general ledgers immediately. Every sister company must have its own bank accounts, credit cards, and accounting files. Stop using one company to pay for another company's marketing, software licenses, or administrative overhead.

Next, look at your Accountability Chart. If you have employees sharing roles across multiple companies, you must clarify their capacity and cost. Either hire dedicated staff for the entity you plan to sell, or implement a strict, auditable intercompany services agreement. This agreement must detail exactly how much time the shared employees spend on the target entity and bill that company at fair market value.

You also need to run clean, GAAP-compliant financials for the specific entity you are selling. Hire an independent accounting firm to perform a reviewed or audited financial statement for at least the last two fiscal years. This process is painful and will require you to pay close attention to detail, but it is the only way to prove to a buyer that your margins are real and that the business can operate successfully as a standalone entity.