Entrepreneurship & Small Business

Want to close down corporation

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  • Jan 20th, 2022 11:29 am
[OP]
Sr. Member
Nov 25, 2009
644 posts
377 upvotes
Vancouver

Want to close down corporation

I want to close down a corporation -- used several years ago to do contracting/consulting work but I have an employer now and have done no business in the corporation since 2019. The last time my accountant and I filed it, the balance sheet ended up $-800 or something like that.

I've been neglecting filing the nil T2 for last year, and just received a letter stating that it's late. Now, I have been reading online that if you fail to pay the annual $20 fee and fail to file a nil T2 for a few years the CRA will automatically close it down. Is that true? Or should I go ahead and start filing the T2 short?

Thanks!
14 replies
Newbie
Jun 14, 2017
66 posts
76 upvotes
lawonga wrote: I have been reading online that if you fail to pay the annual $20 fee and fail to file a nil T2 for a few years the CRA will automatically close it down. Is that true? Or should I go ahead and start filing the T2 short?
If you have a federal corporation, and fail to file an annual return with Corporations Canada (it's a $12 fee that used to cost $20) for a couple of years in a row, then Innovation, Science and Economic Development Canada may dissolve the corporation.

However, it's my understanding that the CRA will still keep hounding you for T2 returns -- regardless of the corporation's status -- until you file a T2 with the "Is this the final return up to dissolution?" option checked.

You can find more details about closing your CRA accounts here.
Member
Jan 18, 2017
361 posts
274 upvotes
If you want to close your corp, usually people are told to pay a lawyer to shut it down. While I usually suggest using professionals, this is one of those times where you don't have to at all. So if you want to DIY this, you do two things:

1. Don't file your annual renewal. Every year, the Province and/or Feds will send you an annual renewal form and request to pay them a renewal fee. Don't do this. You can safely ignore these requests.

2. File your tax returns. You have to do this. CRA and the corporate registry are different entities. CRA requires you to file a tax return for every year your corp exists. If you don't, CRA doesn't just forget about it - They will continue to hound you even with an innactive corp.

Functionally, what happens is: Don't pay your annual renewal for Year 1, but DO file your Year 1 tax return (nil return). Then same thing for Year 2: Don't file/pay your annual renewal, but DO file your tax return (another nil return.) Once Year 3 hits, the Province/Feds will go ahead and helpfully dissolve your corp for you. At that point your corp no longer exits, but you'll need to file one last nil return for that stub year.

At that point, you're good to go.
lawonga wrote: I want to close down a corporation -- used several years ago to do contracting/consulting work but I have an employer now and have done no business in the corporation since 2019. The last time my accountant and I filed it, the balance sheet ended up $-800 or something like that.

I've been neglecting filing the nil T2 for last year, and just received a letter stating that it's late. Now, I have been reading online that if you fail to pay the annual $20 fee and fail to file a nil T2 for a few years the CRA will automatically close it down. Is that true? Or should I go ahead and start filing the T2 short?

Thanks!
______
Canadian & US tax guy (CPA)
[OP]
Sr. Member
Nov 25, 2009
644 posts
377 upvotes
Vancouver
crossborderguy wrote: If you want to close your corp, usually people are told to pay a lawyer to shut it down. While I usually suggest using professionals, this is one of those times where you don't have to at all. So if you want to DIY this, you do two things:

1. Don't file your annual renewal. Every year, the Province and/or Feds will send you an annual renewal form and request to pay them a renewal fee. Don't do this. You can safely ignore these requests.

2. File your tax returns. You have to do this. CRA and the corporate registry are different entities. CRA requires you to file a tax return for every year your corp exists. If you don't, CRA doesn't just forget about it - They will continue to hound you even with an innactive corp.

Functionally, what happens is: Don't pay your annual renewal for Year 1, but DO file your Year 1 tax return (nil return). Then same thing for Year 2: Don't file/pay your annual renewal, but DO file your tax return (another nil return.) Once Year 3 hits, the Province/Feds will go ahead and helpfully dissolve your corp for you. At that point your corp no longer exits, but you'll need to file one last nil return for that stub year.

At that point, you're good to go.
Awesome! Thank you!
Deal Addict
Jul 21, 2005
2026 posts
1075 upvotes
Alberta
Why not just dissolve it the normal way and be done with it? I was in the same situation, I just filed my T2s and dissolved the corporation, don't recall the whole process but it was quick and easy.
Sr. Member
User avatar
Feb 16, 2014
526 posts
445 upvotes
eblend wrote: Why not just dissolve it the normal way and be done with it? I was in the same situation, I just filed my T2s and dissolved the corporation, don't recall the whole process but it was quick and easy.
Why not just sell it.... the shares. There is a demand for "clean" corporations that were incorported years ago as some new businesses want to show they have been in business "for years...even decades" (albeit mostly inactive).
[OP]
Sr. Member
Nov 25, 2009
644 posts
377 upvotes
Vancouver
b33zlebub wrote: Why not just sell it.... the shares. There is a demand for "clean" corporations that were incorported years ago as some new businesses want to show they have been in business "for years...even decades" (albeit mostly inactive).
Oh jesus, you can do this?

Still have not closed it yet. I am going to try this if so!
Sr. Member
User avatar
Feb 16, 2014
526 posts
445 upvotes
lawonga wrote: Oh jesus, you can do this?

Still have not closed it yet. I am going to try this if so!
Yup... simple process, merely a purchase and sale contract, so long as the company doesn't have any lingering liabilities (e.g. outstanding lawsuits, warranties, etc. etc.). Should be CLEAN. <-- assuming sole shareholder so no other shareholders to worry about.
[OP]
Sr. Member
Nov 25, 2009
644 posts
377 upvotes
Vancouver
b33zlebub wrote: Yup... simple process, merely a purchase and sale contract, so long as the company doesn't have any lingering liabilities (e.g. outstanding lawsuits, warranties, etc. etc.). Should be CLEAN. <-- assuming sole shareholder so no other shareholders to worry about.
Do you happen to know... any marketplace or connections for this?
Deal Addict
Dec 13, 2007
2026 posts
539 upvotes
Toronto
b33zlebub wrote: Yup... simple process, merely a purchase and sale contract, so long as the company doesn't have any lingering liabilities (e.g. outstanding lawsuits, warranties, etc. etc.). Should be CLEAN. <-- assuming sole shareholder so no other shareholders to worry about.
Have you actually tried to do that? No one in their right mind will buy a previously used corp just for papers. The liability is always an issue and there is no way to prove someone will not decide to sue the corp years later.

Besides, there is an availability of shelf corps (clean by definition) of various ages, and not terribly expensive. Why would anyone go for a potentially compromised used corp?
Sr. Member
User avatar
Feb 16, 2014
526 posts
445 upvotes
slavka012 wrote: Have you actually tried to do that? No one in their right mind will buy a previously used corp just for papers. The liability is always an issue and there is no way to prove someone will not decide to sue the corp years later.

Besides, there is an availability of shelf corps (clean by definition) of various ages, and not terribly expensive. Why would anyone go for a potentially compromised used corp?
True.
So long as the seller can show inactivity for years and years and no liabilities to mitigate risks, it could be cheaper than a shelf corporation.
Jr. Member
Feb 28, 2007
162 posts
112 upvotes
Toronto
I am wondering how I can verify if Ontario has dissolve a incorporation that missed annual return for several years.

I accidentally missed filing schedule 546 when I filed T2short return (for the last 5+ years). I only realized very recently.

Then I applied for company key in Ontario Business Registry and it still showd active status.

thanks
crossborderguy wrote: If you want to close your corp, usually people are told to pay a lawyer to shut it down. While I usually suggest using professionals, this is one of those times where you don't have to at all. So if you want to DIY this, you do two things:

1. Don't file your annual renewal. Every year, the Province and/or Feds will send you an annual renewal form and request to pay them a renewal fee. Don't do this. You can safely ignore these requests.

2. File your tax returns. You have to do this. CRA and the corporate registry are different entities. CRA requires you to file a tax return for every year your corp exists. If you don't, CRA doesn't just forget about it - They will continue to hound you even with an innactive corp.

Functionally, what happens is: Don't pay your annual renewal for Year 1, but DO file your Year 1 tax return (nil return). Then same thing for Year 2: Don't file/pay your annual renewal, but DO file your tax return (another nil return.) Once Year 3 hits, the Province/Feds will go ahead and helpfully dissolve your corp for you. At that point your corp no longer exits, but you'll need to file one last nil return for that stub year.

At that point, you're good to go.
Member
Jun 28, 2011
366 posts
650 upvotes
I thought within the CRA Business Account on the website, there is an option to close the corporation.

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