For a pharmacy business what should be the fiscal year end?
By Michael Fromstein | July 14, 2011
For a pharmacy business what should be my fiscal year end? Company was registered with December 31 year end, after reading some more info for incorporation it can be any date? City is Markham, Ontario.
Michael Fromstein answered:
The type of business does not really impact on what the fiscal period should be. Sometimes, if the business is seasonal, you may wish to pick a year-end that coincides with "down time" for the business. When that is not the case, which is most of the time, there are really two drivers: simplicity and potential tax savings. I think both factors mitigate to some year-end between July and October. The reason July is desirable is that corporations can "accrue" (i.e. claim a deduction for an expense that has not yet been paid) a deduction for management wages or bonus, and have 180 days to pay that accrual. Since 180 days is always less than six months, picking a June year-end or earlier means that the owner cannot spread the tax consequences of one year over two personal taxation years.
That ability to defer or smooth income is often attractive. The reason I don't like December corporate year-ends even though many reporting slips (e.g. T5s) come out on calendar years is practical. Often, by the time you get information to the accountant, the staff will be getting busy on personal tax returns. It will often be hard to have you corporate financials done before you are doing your personal tax return. That makes it harder to make some decisions you might otherwise want to make.
Picking a year-end from July (to get the ability to defer-smooth taxable income) until October, gives you the ability to have your corporate information well before you have to do your personal tax returns, and gives the accountant the ability to prepare your statements before the staff get too busy/tired from personal tax season to pay more attention.