Every story has a beginning and an end, and in the world of business, it's no different. As with all things, some businesses soar to incredible heights, while others take a different path. Sometimes, it's just time to close the book and start a new chapter. Whether you're ready to move on to your next venture or just want a break from the entrepreneurial world, wrapping things up properly is crucial.
So, if you're here to understand how to dissolve your Canadian corporation, you've come to the right place! From shutdown options to tax implications, we'll walk you through it all.
The Reasons Behind Corporate Closure
First off, why do companies close? Here's what we've observed:
Business closure: Maybe the market changed, or perhaps you just need a change. Either way, it's okay. Business isn't just about profit; it's about growth, experience, and evolution.
Mistaken incorporation: Sometimes, businesses are set up without fully understanding the implications. It happens! And it's okay too.
No matter your reason, closing your corporation is a step towards a fresh start. And we're here to help you through it. So, how do you close a business in Canada? Continue reading below.
How to close a business in Canada: Shutdown Options
Dissolve Formally: This involves formally ending the corporation's existence, often through legal channels. While it might involve some fees, it's a clean break. Some provinces even allow you to handle this online, like with the Registres Des Entreprises du Quebec.
Let it Fade: By not filing annual reports, corporations can be dissolved automatically. While it might seem easier, there are still tax returns to remember.
Your Business Dissolution Checklist
Assets: Sell them or transfer them to yourself. Check prior tax returns or consult with your accountant to determine current tax values.
Liabilities: Clear all debts before shutting down. Close any corporate credit card accounts once everything is paid.
Ensure inactivity: Before you proceed, make sure there's no more business activity. Cancel all transactions, and make sure no more business operations are in the pipeline.
Close corporate bank accounts: Once everything's settled, close your business account.
You'll need to ensure all your tax ducks are in a row. This means filing your final corporate tax returns, ensuring any sales tax, payroll, or other information returns are settled. Don't forget to close all relevant accounts with CRA.
Tax Implications When Closing Your Business
The way you're taxed when closing your corporation largely depends on the lifetime profitability of the business. If your business was profitable, expect dividends. If it wasn't, you might be looking at Allowable Business Investment Losses (ABIL), which can reduce tax liability.
Why Hiring an Accountant is a Great Idea
An accountant can be your guide through this complex process. They'll handle final calculations, liaise with legal professionals, handle filings, and ensure everything is closed correctly. Think of them as your business closure sidekick.
Dissolving a corporation is indeed a task, but remember, it's just one chapter in your business journey. Whether you're diving into a new venture or taking a well-deserved break, the future is a blank slate waiting for you.
Got more questions? If things get too overwhelming, we're here to help.
Nex CPA is a boutique Canadian digital accounting firm that provides online accounting solutions by combining technology and forward-thinking businesses. Tailored for the modern entrepreneur, we provide an easy, automated and client-focused service so you can focus on working 'on' the business and not 'in' the business.
For more information, please contact us at firstname.lastname@example.org.