A business-purpose financial year can be established when it is: (1) a natural business year; (2) an ownership tax year; and (3) an accounting year. In each case, a corporation must have a balance sheet that includes the following information for the year ending on the designated date and the current value of its assets, liabilities and equity. The balance sheet is the statement of the book value of all outstanding shares of stock at the end of a financial year.
Financial years can be designed for different purposes. The most common purposes for creating a financial year are to record the corporate finance and assets for tax purposes and to set the company’s financial objectives and plans. It also provides a period in which to prepare the annual or semi-annual report that contains the financial statements, income statement and balance sheet information required by the Corporation Code of Conduct for Private Companies.
A natural business year can be established by incorporating your business in the state in which it will conduct its trade. If it is an LLC, a business may not need to incorporate in that state. Your local Small Business Development Center will assist you in determining the appropriate state to incorporate in. You will also need to determine if the state’s incorporation laws require that a natural business year begin in the same calendar year as the year in which the LLC was formed.
In any case, a business must establish a financial year that begins on January 1. The calendar year ends on December 31. An LLC may elect to continue its financial year after the calendar year ends, but it has to be done separately from the business’s calendar year, with a different statement of account.
A corporation can also choose to continue its year after it begins. In this case, it would be necessary to elect separately from the LLC.
One way to establish your natural year is to hold an annual meeting of stockholders of your corporation. During that meeting, the board of directors will decide the extent of your company’s interest in establishing a natural business year, the financial plan for establishing it and whether to hold an annual meeting of stockholders or not.
At the conclusion of your annual meeting, the board must be in agreement regarding the year to designate. and then you must adopt the name of your natural business in the State where it is to be incorporated. The name must be registered with the Secretary of State.
If you do not want to be incorporated in a state where you have chosen to be incorporated, you can appoint a secretary of your business (or a qualified accountant) to administer the business’s accounts. For example, you can appoint a member of your board of directors as your accountant.
An advantage of having a secretary of your business is that the secretary can be held responsible should your corporation fail to meet the accounting requirements for a natural business year. The secretary is generally responsible for filing the financial reports required to be filed by your state. The secretary will also need to be available to answer any questions concerning the operations of the corporation.
In addition, the secretary will be able to provide you with some assistance in preparing the year of your choice, particularly the incorporation papers and other forms, as well as other information related to your decision. and your year of choice.
If you choose separate incorporation, you will not be responsible for submitting the necessary paperwork to your state’s secretary of state. for filing of your annual statements of account and general business records. It is your responsibility to do this on your own.