If you’re thinking about closing your business, it’s important to understand the legal and financial obligations involved.
For example, every registered business must file a change of business status or dissolution notice. You’ll also need to shut down the various accounts you opened when you started your business, settle any outstanding balances, and file a final tax return.
To help you meet your obligations to the CRA, provincial authorities, and other government agencies, let’s take a closer look at what you need to do when closing your business in Canada.
Shutting down your business: key steps
If you’re registered as a sole proprietorship, partnership, or corporation and you have a BN (business number), you must notify the CRA and complete several key steps before closing your business.
Closing your payroll accounts. This will include remitting all outstanding employee payroll deductions, pension contributions (CPP/QPP), and employment insurance (EI) premiums to the CRA within seven days of the day your business ends. You’ll also need to complete and file employee T4s and T4As within 30 days.
Closing your GST/HST accounts. This will include:
- Reporting and remitting any outstanding GST/HST amounts to the CRA as soon as your business closes
- Making sure the end date of your final return matches your company’s final day of operations
You may need to make two separate GST calculations as part of this return – one for amounts owing on any capital property, and one for amounts owing on any non-capital property.
Canceling your business registration. This will include completing and filing a notice of closure or dissolution with your provincial Corporate Registry office. How and where you file will depend on your business structure and the jurisdiction in which you operate.
For a sole proprietorship or partnership, for example, you can typically download, fill out, and submit the appropriate form online. If you’re voluntarily dissolving a corporation, you can usually file your notice online, by mail, or through a lawyer.
A word about corporations
Corporate dissolutions tend to be more complicated than closing the doors on a sole proprietorship. As a minimum, before dissolving your corporation you’ll need to:
- Ensure your company is in good standing
- Distribute or assign any assets, liabilities, or property
- Confirm that you have the authority to shut down your business
You’ll also need to send the CRA a copy of your articles of dissolution when you file your final corporate tax return, ensuring the end date on your return matches the date your corporation ceased operations.
Other business closure tasks
Here are some additional tasks you may be responsible for carrying out on route to shutting down your business:
- Closing your PST, QST or other provincial retail sales tax accounts
- Closing or terminating your employer health tax (EHT), WorkSafe, or private employee pension plan accounts
- Cancelling your business insurance and any municipal business permits or licences
- Filing any outstanding tax or information returns and paying all unsettled amounts (note that you won’t be able to close out your business accounts in full until you no longer owe money to the CRA or any provincial agency)
Whether you’re walking away from your business, filing for bankruptcy, selling your company or passing it on, meeting certain obligations is crucial. The best way to prevent unexpected issues catching up with you later is by seeking legal advice and working with an experienced accounting professional.
Even if you’re not ready to close your business today, the sooner you set the wheels of succession planning in motion, the more financially prepared you’ll be when the time comes.