Personal Finance

Does an 'aged' federal Canadian corporation have any inherit value?

  • Last Updated:
  • Dec 5th, 2020 12:16 am
[OP]
Newbie
Mar 18, 2019
5 posts

Does an 'aged' federal Canadian corporation have any inherit value?

Hi there, a decade+ ago I created a federal Canadian corporation for my freelance IT / software development business.

It was a nieve choice given that to this day I remain the only 'employee' / shareholder and given the added burden of filing corporate tax - not to mention the complexities of accounting since the money you earn from it you will have to draw out in some way such as dividends or payroll and then reflect that on not only the corporate return but also your personal - I 100% would recommend against it to any up and coming entrepreneurs.

Instead you should simply use sole proprietor status for as long as seemingly possible; and if at some point your business kicks off extra cash that you can use to help fund some sit-down time with professionals who may have better understanding of corporate law to help you make the decision about how to structre things - then that is the time to begin considering if to incorporate. In other words, don't 'incorporate' until you are actually making enough money to even justify thinking about it. If you already have debt, or are struggling to pay rent month to month you are absolutely not justified in thinking about it. Even if you are making good money, you may not need/want the burden ever! /end rant

So with that said - and after having a poor year of sales, not to mention some outstanding taxes due (on said corporation) - I am looking to gracefully conclude this corporate entity off somehow and as part of that process I am just doing some preliminary research (hence this thread). My first question is there any inherit value in an 'aged' corporation like this?

And to be clear, I am not trying to skirt responsiblity for the outstanding taxes due on it and intend to pay what big brother needs to be paid - I am simply evaluating all available options. I have absolutely no idea if aged corporations have value on their own so I thought it was prudent to ask. Like many, I have read that it is a somewhat common practice for investors or entrepreneurs or even other corporations to sometimes buy corporate entities as part of their own tax sheltering strategies; or in some cases perhaps it is cheaper / easier / more desireable than starting a new corporation. Those aspects are none of my business but if someone else feels they can get value out of it - then great, maybe there is opportunity for a win / win here.

Anyway, your insights or advice would be appreciated! Ie- on the value of an 'aged' corporation if any, or if you might suggest another route to help in the 'graceful conclusion' of this corporation.
4 replies
Sr. Member
Feb 18, 2019
514 posts
664 upvotes
If the aged corporation has access to credit that's not tied to you personally, that has worth. For instance if you're buying a business that relies on a lot of revolving credit to stay afloat (Maybe you use a large line of credit as purchasing power or to manufacture products where profits might not be realized for months), it has value if the corp is established enough that the credit being extended is tied to the corporation as opposed to an individual. This doesn't sound like your case... But maybe the fact the corp is almost 10 years old means banks might extended credit more easily.

The only other worth AFAIK (and people do buy "aged" corporations for this reason) is so that an individuals can launch a business and be able to say something like "proudly serving Canadians since 1999" or something like that, when in reality they just bought an aged corp like yours and are lying. If someone searches the name on a government website, it'll verify that said corp has been in business for x number of years and most people probably wouldn't question it.
Member
User avatar
Nov 23, 2014
497 posts
466 upvotes
Toronto, ON
I was in n same boat.But it was a US corporation
Almost no profits or much income for the Corp .I ran it for 11 years and sold it for 5 figures..it was valued for age. Not sure if there is much demand for aged Canadian corps
Member
User avatar
Feb 16, 2014
346 posts
248 upvotes
unodos wrote: I was in n same boat.But it was a US corporation
Almost no profits or much income for the Corp .I ran it for 11 years and sold it for 5 figures..it was valued for age. Not sure if there is much demand for aged Canadian corps
Yes, there is $$ value if no debts, liabilities and all corporate returns filed up to date
Lawyers will have these "shelf" corporations readily available on short notice.
[OP]
Newbie
Mar 18, 2019
5 posts
Thanks for the responses ! Great input. I am certainly behind on books, not too mention a bit of a tax bill to pay, but now will at least be a tad more inspired to catch up on all of that and then perhaps see about a way to make it for sale.

On that note, if someone needs an aged Canadian corp (incorporated 2006) sooner than later feel free to chime in or send me a PM. Otherwise when it's finally 'ready' maybe I will post in the Buy Sell Trade section here on RFD forums. Thanks again.

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