Before incorporating, you should speak with your accountant to determine the best financial year-end date (within legal limits) for your business. That said, you can always change it later with a shareholder resolution and proper documentation.
Meaning and Importance
The corporate financial year-end marks the close of a corporation’s official accounting period for the fiscal year. At this point, companies prepare their annual financial statements, file corporate tax returns, and complete key regulatory filings. For Ontario corporations, the financial year-end can be any date and doesn’t have to match the calendar year (December 31).
Choosing a Year End
Most businesses select their year-end during the incorporation process, often opting for either December 31 or the last day of a month that aligns with operational lulls or seasonal business cycles. The most common financial year-end dates are March 31, June 30, September 30 and December 31, but companies with significant business around the holidays, such as retail, often pick January 31 to ease year-end processes.
Corporations must ensure their first fiscal period does not exceed 53 weeks (371 days) from the date of incorporation, and once set, the year-end typically remains constant unless changed by a shareholder resolution and with proper documentation.
Consider choosing a financial year end-date that falls just within a year from incorporation date so you have as much time as possible to file your initial T2 tax return without going over the 53-week limit.
Legal and Tax Requirements
While there is flexibility in the choice of a financial year-end date, strict compliance follows. Generally speaking, all corporations must file their T2 corporate income tax return with the Canada Revenue Agency within six months of the fiscal year end, and pay any taxes owed within three months. Furthermore, corporations must file an annual information return with the Ontario Business Registry, also within six months of their year-end. Missing these deadlines can result in penalties or jeopardize corporate status.
Your accountant will be able to help you with your company’s tax returns. But with SkyLaunch’s Complete Compliance Package, we can help you look after the annual information return filing with the OBR and any other updates to your minute book during the year.
Changing the Year-End
Corporations are permitted to change their financial year end, but only under certain conditions and with proper resolution and notification to tax authorities. The change must make operational sense or arise from significant business shifts, and is not allowed to lengthen the fiscal period beyond legal limits.
Key Considerations
- The financial year end dictates the timing for tax payments and financial reporting.
- Year-end financial statements serve as the authoritative record for lenders, investors, and compliance officials, so accuracy and timeliness are crucial.
Give some thought into selecting your financial year-end and be sure to speak to an accountant who’s familiar with your business for advice!
