A Step-by-Step Guide for Small Business Owners
Starting a business can be an exciting venture, especially for new immigrants who have moved to Canada to pursue their entrepreneurial dreams and a better life for their families. However, there are times when a business owner might decide that it is time to close the doors on their venture. This guide will walk you through the process of dissolving a Canadian federal corporation, a process that is often simpler than many people anticipate. We will also highlight situations where professional legal assistance might be necessary.
Why Dissolve a Corporation?
There are many reasons a business owner might choose to dissolve their corporation. These can include the completion of a business venture, a strategic pivot, retirement, or financial difficulties. Whatever the reason, it’s important to follow the proper steps to ensure the dissolution is handled legally and efficiently. For young entrepreneurs and immigrant business owners, understanding this process is crucial, as it ensures that all legal requirements are met and future opportunities remain unencumbered.
Step-by-Step Guide to Dissolution
Step 1: Prepare for Dissolution
Before you start the dissolution process, ensure that the corporation is solvent, meaning it can pay its debts. You should also get the consent of shareholders and directors, if applicable.
Step 2: Apply for Dissolution
You can apply to dissolve a corporation online through the Corporations Canada website. The process is straightforward, and you will need to fill out and file the Articles of Dissolution form (Form 17).
1. Access the Online Filing Center:
Visit Corporations Canada’s online filing center and log in. You will need the Corporation Key to make the filling.
2. Confirm Property and Liabilities:
The first step in filing Form 17 is to confirm that your corporation does not have any property or liabilities.
3. Confirm Solvency:
Next, confirm that your corporation is not insolvent or bankrupt.
4. Confirm Corporate Information:
Review and confirm your corporation’s information as recorded. Ensure all details are accurate.
5. Dissolution Effectiveness Date:
Specify the dissolution effectiveness date. This can be the date of filing or a future date.
6. Download and Sign Form 17:
Download a copy of the completed Form 17 Articles of Dissolution. Print and sign it. While you do not need to send the signed copy, keep it with your company records.
Step 3: Submit the Application
Submit the completed Articles of Dissolution form online.
After submission, you will receive an email with the Certificate of Dissolution, which officially confirms that the corporation has been dissolved.
Step 4: Notify Stakeholders
Inform employees, creditors, suppliers, customers, and other relevant parties about the dissolution. This ensures that all stakeholders are aware of the closure and can make any necessary arrangements.
Step 5: Finalize Financial Obligations
- Final Tax Returns: File the final corporate tax return with the Canada Revenue Agency (CRA) and ensure all taxes, including GST/HST if applicable, are paid.
- Distribute Remaining Assets: Distribute any remaining assets of the corporation to the shareholders according to their shareholding percentages, ensuring all liabilities are settled first.
Step 6: Cancel Business Licenses and Permits
Cancel any business licenses, permits, and registrations associated with the corporation.
Step 7: Close Bank Accounts
Close the corporate bank accounts and any credit lines associated with the business.
Step 8: Maintain Records
Keep the corporation’s records for a specified period as required by law (usually six years). This includes financial statements, tax returns, and dissolution documents.
Step 9: Final Payroll Requirements
Issue final paychecks to employees and provide them with Records of Employment (ROEs) and T4 slips.
Dissolution Can Be Done by Yourself
Dissolving a Canadian federal corporation might seem daunting, but in most cases, it is a process that business owners can handle themselves. The steps are straightforward and manageable, ensuring that the dissolution is handled smoothly without the need for professional assistance.
When to Consult a Lawyer
While the dissolution process is generally straightforward and you can do it by yourself, there are situations where you might need to consult a lawyer:
- Complex Financial Situations: If the corporation has complex financial obligations or disputes.
- Insolvency Issues: If the corporation is insolvent or facing bankruptcy.
- Shareholder Disputes: If there are disputes among shareholders regarding the dissolution.
Recommended Lawyers
Trustiics offers direct access to vetted lawyers who can assist with these situations, efficiently and affordably.
Consider reaching out to experienced business lawyers like Martin Aquilina in Ontario, and Jie Han in Quebec for expert guidance if you run into complicated legal issues in the process of closing your business in Canada.
Create a free account on Trustiics, select your lawyer(s) and get free quotes from them. Lawyers get paid after the service is delivered.
By following these steps and seeking professional assistance when needed, you can ensure that your business dissolution is handled smoothly and efficiently.
Why Trustiics?
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