legal - Tax Year & Incorporation Question - OnStartups Beta - Stack ...

The IRS generally does not allow S-Corps to designate an alternate tax year (with the exception of section 444 election) so the LLC and C-Corp are your options. [UPDATE: A LLC can only set its own fiscal year if it is taxed like a corporation; single member and partnership pass-through taxation force the LLC to abide by the tax year of the individual member(s)]. Why not set the fiscal year to later in the year, like June or November? Note that you need to commit to that fiscal year once you declare it to the IRS. The notion that you are limited to 3 months out is specific only to S-Corps under IRC Section 444: See here

A partnership or an S corporation that makes a section 444 election must make certain required payments and a PSC must make certain distributions. Here's what IRC Section 444(1) says: In General. - Except as provided in paragraphs (2) and (3), an election may be made under subsection (a) only if the deferral period of the taxable year elected is not longer than 3 months.

The state you set up the business entity in does not influence the federal tax rules applicable in your question. Michigan state tax rules may be different, so it'd be wise to double check on that.

Disclaimer: I am not a tax lawyer and this is should not be taken as professional advice. This is simply my opinion based on personal experience and research.

Source: http://answers.onstartups.com/questions/44538/tax-year-incorporation-question

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