Corporations – Making Tax Year Designations

Death and taxes are those two things you can neverfiscal year, which can cause your books to get out of
escape. When forming a corporation, making your taxwhack at the end of the year. A middle year
year designation is a fundamental step you need todesignation avoids this and offers other leveraging
take carefully.opportunities.
Taxes are defined by something magical known asSo, what about an “S” corporation? The S
the fiscal year. It is a 365 day period that defines acorporation is tailored to small businesses and lets
business year for a business. With a solethem pass through business finances to personal tax
proprietorship, the fiscal year is automatically thereturns much like a partnership. Because of this tie in to
calendar year – from January 1st throughthe personal returns of shareholders, an “S”
December 31st. The same, obviously, goes for yourcorporation is not allowed to designate a tax year
personal tax returns.other than the calendar year. Put another way, the
Corporations run a bit different when it comes to taxyear has to be January 1st through December 31st.
year designations. In certain situations, you get toIf you form a corporate entity, it is highly
designate the fiscal year. Specifically, a traditional Crecommended that you hire a CPA to help handle the
corporation may designate its fiscal year as any 365tax situation. Corporate tax law is entirely different
day period. For example, I might form a corporationthan personal tax law. There is a lot of room to
and pick a fiscal year running from July 15th of oneimplement tax reduction strategies, but usually only if
year to July 14th of the following one.you take the necessary steps form the very outset of
There are certainly some advantages to tweakingthe corporate filing. In short, spending a bit of money on
fiscal years with C corporations. Most businessesa CPA now can save you a ton of money down the
spend money like mad at the end of the calendarroad, so do it!