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).


29 thoughts on “Accounting for a Corporation”

  1. IMHO, for 95% of folks out there with a small corp, the only option is to let your accountant do it. Screwing it up will cost you a heck of a lot more than the accountant would have.

    1. Lewis Empire says:

      It’s amazing how many businesses try to run without the use of a certified accountant. I’ve seen a lot of money flushed because of poor bookkeeping, tax planning etc. (I am not an accountant so no bias!)

    2. RacerX says:

      Cost + Opportunity! You may miss massive deductions and not take full advantage of your rights!

  2. Lewis Empire says:

    Nice way to present the options John. It’s refreshing to hear someone talk about the benefits of having professional help. Try calling Intuit for help if you get audited!

  3. Dexter says:

    That is why they spend 5 years in college.. let them do it..

    1. RacerX says:

      5 years in College vs 5 years in jail! 🙂

  4. Simon Lau says:

    Good options. Answered my question from an earlier post. I think I’d like to try all the tax stuff myself as a learning experience and then hand it over to an accountant to verify (aka my brother 🙂 ) Still need to do the whole incorporation thing, that will happen after my midterms

  5. Stephen says:

    I do my own stuff on EXCEL. Just in case I need a second opinion, I can send it out easily if I need to and it can be looked at by anyone because special software isn’t required to open the file.

    1. Lewis Empire says:

      I tried that for a while, then realized that Intuit had created Quicken and Quickbooks so I didn’t need to mess around with my own formulas.

      1. Stephen says:

        How portable is the data from that software? The last time I used it, and it was ages ago, it created its own proprietary database files. So if I wanted to email it to someone to have a quick look, they couldn’t because they would also need to have the software.

        I don’t find EXCEL that difficult because once you set things up the way you want, all you do is just save the template and use it every year, altering as your needs change.

        1. John Chow says:

          Both Simply and QuickBooks can export their data to XL.

  6. In my opinion you can do it yourself, but is more painless to use an accountant. Also an innocent mistake on your part can bring about a painful audit. Drop the cash on some peace of mind (assuming your accountant is competent). Also your accountant can help you with your tax planning and is more likely to be aware of all the loopholes.

  7. ali hatukai says:

    Getting help from a someone professional at its work is allways good, at your case, your wife doing it i assume it lowered the costs for you,

    if it works well for you, that you should keep doing it, if not move to a professional help.

    ali hatukai
    http://hatukai.com

  8. Azrael says:

    Nice review, John.
    I like the article!

  9. thanks for answering all of my questions John! You really need to have a “buy a beer” plugin or a donate button….these posts are really helping people and they are being quotes on forums and other blogs all over the internet! Thanks again pal!

  10. Azrael says:

    Getting professional help is definitely something that would be appreciated by a lot of people.

  11. Dustin says:

    I’ve got to say, the last couple of articles you’ve done on blog incorporating have got to be the most informational topics I’ve seen in a long time. Thanks again John…

    1. RacerX says:

      Totally agree John. This has really been a great series. Thanks again!

  12. Tim says:

    We use quickbooks for our business ventures at themoneykings.com. It really is simple to use, and fairly cheap considering it can run your payroll and does the income tax calculations (at least for the US, not sure about other countries). I also use it to track investment income from my buisnesses and business related mileage I track to apply to my taxes.

    I like your idea about a september year end allowing you plenty of time to decide what to do with your companies dividends. That is an excellent idea.

  13. Marita says:

    Great advice here! A good accountant is definitely the way to go. I’ve just switched to a new one and he uncovered thousands more deductions; he knows the rules inside and out and knows how the IRS looks at a return. (The IRS doesn’t compare your return to your previous ones, it compares it to others that are similar for that year.)

    Thanks for all the pointers on how to set it all up – there really are a million little details. It helps me prepare for when I set up mine this year, even if it costs about $800 in California 😯

    Is there a good time of the year to set it up?

  14. Syed Balkhi says:

    i let the accountant take care of that … a good CPA can get you so many deductions.

  15. Terry Tay says:

    Great article!

    Hiring a good accountant is definately the way to go if you don’t know what to do. Even get your accountant to show you how to keep proper books on all your accounting throughout the year. You want to do it right from the start and not have to waste time figuring it all out at the end of your tax year. Keeping your books in order is just good business.

    ~Terry

  16. Ty Brown says:

    Let me say ‘amen’ to this post. This is our first year being incorporated and it is much more complex than when you work for someone. We tried to get it done on our own and finally just hired an accountant. Save yourself the headache and get a pro.

  17. Nice information John!
    I don’t really know much about this particular topic and this post certainly opened my eyes to it a lot.
    Thanks!
    Jonny Hardwick

  18. I am in good hands, my syster do all tax job for me! 😉

  19. Errol Mars says:

    I always believe that if you are going to hire any professional to do anything for, you should at lease have a good idea about how to do the task. In the case of accounting, as a business person you need to understand how to do it yourself, even if you hire a pro. 😎

  20. I really enjoy your series on “accounting” posts John!
    Keep up the good work!

  21. natespost says:

    John has given a great guide here…just need to contact your particular state to make sure you follow any local laws.

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