What is a financial year and when do I have to proceed to the closure of the accounts?
A financial year is a period of time that represents a complete cycle of the company's economic activity. One can indistinctly use the term of financial year or fiscal year.
A financial year is defined by an opening date and a closing date. In general, a financial year is a twelve-month period of time.
However, there may be some exceptions, especially for the first financial year of a company. Indeed, the first financial year can last a maximum of 23 months. However, there then is one specific rule to respect: the financial year must not be spread over more than two calendar years.
For example, if the opening of the first financial year is on June 1 of year N, it must be closed by December 31 of year N+1 at the latest.
Similarly, if the first financial year is opened on 1 January of year N, it must be closed by 30 November of year N+1 at the latest. (23 months maximum)
Alf gives you some advice on how to best choose the closing date of your financial year:
- First of all, you should avoid closing your accounts in the middle of a month. You should prefer closing them at the end of a quarter (March 31, June 30, September 30, December 31).
- Choose the time of year when your company's activity is at its lowest, so that you can have enough time to manage the necessary steps to close your financial year properly.
- If this is your first financial year, do not hesitate to close the financial year as late as possible, in order to avoid a deficit as much as possible and to get a profit and loss account that is as representative as possible of the reality of your business.
In practice, companies often choose a first closing date that is approximately 18 months after the company's registration and, the closure of the accounts is often set in September or October to avoid the December 31st rush, and tax processing delays.
As a reminder, alf makes a point of stressing that the duration of your company's financial year may be modified by amending your company's articles of incorporation, which is possible by organizing an Extraordinary General Meeting.
alf assists you in the creation of your company, as well as the management of all your company's paperwork. To learn more, visit our dedicated page.
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