Closing a corporation can be a complex time, but this guide will help you understand How to Dissolve a Corporation in Canada and the tax implications of winding up your business.

There are two ways you can shut down a corporation:

1. Dissolving Your Corporation

This is the formal legal method of winding up a corporation. Usually a lawyer or a notary will draft and file the articles of dissolution on your behalf, so there will be some legal fees associated with this method.

In some provinces you can file your own articles of dissolution using an online registry service.

2. Allow the Corporation to Die Automatically

Corporations must file an Annual Report with the province in order to continue their existence. Failure to file this report results in the Corporation being automatically dissolved by the corporate registry. You can choose to not file the Annual Reports and allow the company to be dissolved automatically after a couple of years.

Note that tax returns will still need to be filed for the intervening years until the corporation is dissolved. You can either file these simple nil returns yourself (we can provide a template), or you can engage an accountant to file them for you.

Checklist for closing a corporation

Sell any capital assets or investments to third parties for cash.

It’s important that all loans, credit cards, bills, taxes, etc. are paid before you shut down the corporation. Once paid off, you can close any credit card accounts.

Ensure That There is no More Business Activity

Close Your Corporate Bank Accounts

Complete Any Final Bookkeeping

Tax Obligations; How to Dissolve a Corporation in Canada

File Your Final Returns and Close Accounts

You’ll need to file your final corporate tax return, plus any sales tax, payroll or information slip returns that are outstanding.  This can include things like:

• File your final corporate tax return for the period ended on your dissolution date and then close your RC account with CRA>
• File any final GST/HST or provincial sales tax returns and then close the applicable accounts with CRA or provincial bodies.
• File T4s for your payroll account and then close you RP account with CRA
• File any final T5s for dividends issued upon dissolution of the company and close the RZ account with CRA.

Allowable Business Investment Losses from Closing a Corporation

If your corporation has lifetime losses prior to dissolving it, you may have an allowable business investment loss on your hands. A business investment loss results from disposition of certain capital properties such as shares in a small business corporation. If you dissolve your company and have a loss, you may be able to claim a business investment loss.

The allowable business investment loss may be deducted on your personal tax return. If you don’t have enough income to use this deduction in the current year, it can be carried forward for 10 years, or carried back 3 years.

Here are some additional resources to help:

• Law Depot – Dissolving a Corporation
• CRA – Closing CRA program accounts
• CRA – Allowable Business Investment Losses (ABIL)
• TaxPage.com – Dividends on Wind-up (the long version)

How Abdullah CPA Can Help

Abdullah CPA can help you complete the corporate shut down. You can expect an accountant to:

• Calculate any final dividends or business investment losses
• Liaise with your lawyer to ensure any corporate filings (such as the articles of dissolution) are completed
• Prepare any final T4s and T5s
• Close your CRA program accounts
• File any last Corporate tax returns and GST returns required
• Remind you of what you will need to do and when (close bank accounts, etc.)

Hire Abdullah CPA for full range accounting services.