The short answer
Use classes to see income and expenses by department, program, fund or service line. Use locations for stores, offices or campuses, one per transaction. Use projects to follow a single customer job. Use a separate company file when the activity belongs to a separate legal entity with its own tax return. Classes, locations and projects need QuickBooks Online Plus or Advanced, and Plus allows 40 classes and locations combined.
Four tools that look alike
The question usually arrives with growth. A shop opens a second store. A contractor wants to know which jobs paid. A church starts a preschool, or an owner forms a second LLC for a rental property. Each time, someone asks whether the new activity needs its own QuickBooks file or just a label inside the existing one.
QuickBooks Online gives you four ways to separate activity: classes, locations, projects and separate company files. The first three are tags inside one set of books. The fourth is a second set of books. Choosing well up front saves a cleanup later, because moving years of history from one approach to another is real work.
Start with the question you want your reports to answer. "Which store made money?" points to locations. "Which service line earns the most?" points to classes. "Did this job come in under the estimate?" points to projects. "What does this company report on its own tax return?" points to a separate file. Many businesses need two of these at once, which is fine as long as each one has a clear job.
What each tool does in QuickBooks Online
Every feature below comes from Intuit's own help pages as of November 2026. Intuit changes plans and limits from time to time, so check the current pages against your subscription before you build around them.
- Classes represent parts of your company, such as departments or product lines. They are available in Plus and Advanced and turned on under Account and settings, Advanced, Categories. You choose one class per transaction or one class per row, and you can have QuickBooks warn you when a transaction is saved without a class.
- Locations categorize activity from different locations, offices, regions, outlets or departments of the same company. They are available in Plus and Advanced, and each transaction can carry only one location. Payments for one location can be deposited together.
- Projects group the transactions, estimates and expenses for a single customer in one place, so you can see income, costs and margin for that job. They are available in Plus, Advanced and Intuit Enterprise Suite. Advanced adds project estimates compared with actuals.
- Separate company files keep completely separate books. Intuit says each company requires its own paid subscription, though companies can share one sign-in. Users must be invited to each company, bank and card connections are set up in each file, and list changes in one file do not carry to the other.
- Limits. Intuit's usage limits page says Simple Start and Essentials do not include classes or locations, Plus allows 40 classes and locations combined, and Advanced has no limit. Only active classes and locations count toward the limit.
| Situation | Usually fits | Why | Watch for |
|---|---|---|---|
| Profit by department, program or service line | Classes | Tags each transaction or each row within one set of books | Plus allows 40 classes and locations combined |
| Two stores or offices in one business | Locations | Reports and deposits by site | Only one location per transaction |
| Profit on each customer job | Projects | Groups a customer's income, costs and estimates | Plus, Advanced or Intuit Enterprise Suite only |
| Church funds or ministries | Classes, plus fund balance reporting | Keeps the purpose attached to each gift and expense (details) | Fund balances still need carrying forward |
| A second LLC or corporation with its own EIN | Separate company file | Its return needs books holding only its own activity | Its own subscription, bank connections and close |
| A side activity with no separate entity | Classes or locations, with your CPA's input | Keeps one set of books while showing the activity apart | Whether it is a separate business is a CPA question |
When a separate file is the right answer
Tags work well inside one business. They are a poor fit for two businesses. A common rule among bookkeepers: if the activity is a separate legal entity, with its own EIN, bank accounts and tax return, it gets its own company file. The return for that entity has to come from books that hold only its own activity.
The IRS points the same way. IRS Publication 538 says two businesses are not treated as separate and distinct unless a complete and separate set of books and records is kept for each. Keeping two entities in one file with classes blurs that line and makes money moving between them hard to follow.
A separate file has costs too. Each one needs its own subscription, its own bank connections and its own monthly close, and each produces its own reports. If you need one combined view of both, plan how you will get it before you split. Whether a new activity should be a separate entity at all is a question for your CPA or attorney, and LLC vs. S corporation bookkeeping explains how the books differ by tax classification.
Using classes and locations together
Classes and locations can run side by side, which gives you two ways to slice the same transactions. A business with two stores might use locations for the stores and classes for product lines. A church might use locations for campuses and classes for funds or ministries. On Plus, both count toward the same limit of 40, so list every class and location on paper before you create any.
Keep the chart of accounts about what a transaction is, and let the class or location say where or for which purpose. Accounts like "Store 2 Supplies" or "Missions Travel" multiply quickly and make reports hard to read. For churches, the setup decisions for funds, including how to carry fund balances forward, are covered in QuickBooks for church fund accounting. The fund accounting page explains what fund accounting support includes.
Changing course later
If you outgrow the approach you chose, there are a few common paths. A business that hits the Plus limit can make unused classes inactive or move to Advanced. A business that put two entities in one file usually starts a separate file from a clean date and moves only what it must. A business that tracked jobs with classes may switch to projects for new work and leave the old jobs as they are.
Each of these is a cleanup or migration project, and it goes better with a written plan: what moves, from what date, and how the opening balances are checked against statements. Before you hire QuickBooks cleanup covers how to prepare, and QuickBooks Online plans compared lists what each plan includes.
Danielson Bookkeeping's QuickBooks services include new setups with class or location tracking where it helps, cleanup and catch-up, and migration with opening balances verified against statements.
