Accounting for a Corporation

You checked all the numbers and have concluded that running your blog as a corp makes good financial sense. I’ve shown you why I run my site as a corp and how to incorporate. Now, let’s talk about accounting and how much it cost to file a corporate tax return.

The Easy Way – Let The Accountant Do It

If you know nothing about accounting, then it may be best to hand the duty over to an accountant or bookkeeper. Most bookkeepers can give you a flat monthly rate to maintain your books. When the time come to file the corporate income tax return, you can expect to pay anywhere from $1,000 to $2,500. This fee normally includes closing the books, filing the tax returns and tax advice/planning.

In my situation, I maintain the books myself (well, my wife does) and have my accountant file the yearly personal and corporate income tax returns. Maintaining the books really isn’t that hard if you use a good accounting program like Simply Accounting by Sage or QuickBooks by Intuit. A Good accountant will help you set up the initial chart of accounts and show you have to journalize each entries. After you’ve done a few, it’s easy.

Use a Non Calendar Year End

When setting up a new corp, I highly recommend using a non calendar year end. Unlike you and me, a corp is allowed to have a year end that is not Dec. 31. There are many advantages for not using the Dec. 31 year end date.

Internet advertising is very seasonal. Traditionally, up to 40% of a blog’s ad revenue will come in the last quarter of the year. By setting a corporate year end of September 30 instead of December 31, you can effectively defer your biggest quarter sales to the next tax year.

Another advantage comes in tax planning. Continuing with our example, a Sept. 30 year end would allow you plenty of time to decide how much to pay yourself (or if you should pay yourself) in the current tax year in order to maximize the tax savings. A staggered year end allows you to defer taxes on bonus payments. For example, the corp can declare a bonus (say $100,000) to you in the current year end and have it payable on January 1 of next year. The corp will be able to claim the bonus deduction in the current year. However, because you’ll receive the payment on Jan 1, you won’t have to pay taxes on that money until the next tax year.

The final reason for using a year end other than Dec. 31 is accountants are just too damn busy doing personal tax returns in the first quarter and won’t be able to give your corp the attention it deserves.

Can I File a Corporate Tax Return Myself?

Of course you can. Other than not knowing how to do it, there is nothing to prevent you from filing your own corporate tax return. If you want to be a do it yourself filer, then I recommend using QuickBooks accounting software instead of Simply Accounting. The reason I like QuickBooks is because it integrates seamlessly with QuickTax (call TurboTax in the US). While most people use QuickTax for their personal returns, Intuit does offer a corporate edition that will take your accounting records from QuickBooks and do the corporate tax return for you. Print it out, sign it, mail it and you’re done.

QuickBooks sells for $99.95 and can be purchased at any office supply or computer store. However, You can get it for free by signing up for the QuickBooks Quick Start Kit (you do have to pay $4.95 shipping and handling).