Picking a Corporate Year-End

Submitted by Kevin on Tue, 11/13/2012 - 17:23
Picking a year-end can be easy.  All you need to do is throw a dart at a calendar.  That said I would recommend a more thoughtful approach.  Some things to consider are:  What is your busy season, When do you take your vacations, when is cash flow the slowest, do you already have other corporations?  What are the year-ends of your other corporations?  Do you like them, or do you wish they could be changed?

If you like the year-end of your other corporations then you want to match your new corporate year-end to them.  If you don’t like it, set up your new corporation with a year-end you think will be better, and then change the existing corporation(s) year-ends to match the new one.

GST
Make sure your GST matches your corporate year-end.  This will make your life (and your accountants life) so much easier.  It means you  will only have to do your book keeping once, and everything will be done at the same time.

If you have the choice (you make less than $1.5 M in sales) choose to file annually, unless you are going to do your own book keeping, or have someone do it on a monthly or quarterly basis.

Don’ts
  • Don’t pick a year end in the middle of your busy season
  • Don’t pick a year end when you know cash is tight
  • Don’t pick a year end that is not at the end of a month (always choose the end of a month)

Do’s

  • Pick a year end either three months before your busy season, or one month after the busy season ends
  • Pick a year end that matches other corporations you already own, or move other corporations year-ends to match your new one.
  • Get your bank to issue bank statements that end on the last day of the month.  Middle of the month cut offs are really a pain in the @$$.

No matter what try to avoid December 31st year ends.  It is harder to do good tax planning because T-slips are due at the end of February. You can’t do your year end until you get your last bank statement which usually happens sometime in January.  The December year-end is due at the end of March which is right in the middle of personal tax filing season which means your accountant does not have as much time to meet with you as you may desire or need.  If you are determined to have a December 31st year-end, be organized and get in to see your accountant no later than Valentine’s Day.  This won’t be a date that either one of you really had in mind.

A quick hint about year-ends.  It does not matter when you incorporate.  ALWAYS have your year-end at the end of a month.  Further, the longest a year can be (your first year) is about 372 days.  So if you incorporate at the end of a month (Aug 25-31 for example) you can still have an August 31st year-end.  If you incorporate any earlier than the 25th of a month (excluding February) you will have to have your first year-end by the end of the proceeding month. 

This is not a time to be cheap.  Don't pick the year-end that is the farthest away.  Pick a year-end based on thought and consultation, not on how long you can put it off for.  Make sure you understand your tax planning options based on the different year-ends available to you.  If no one has ever talked with you about tax planning talk to us or at least find an accountant who has the willingness to meet with you to discuss tax planning.  YES TAXES CAN BE PLANNED!!!  If you do it right you will also pay less,..., a lot less.  And the best part ............ It is totally legal.  I will repeat this cause it is important.  IT IS TOTALLY LEGAL.