As a small business owner, there are many reasons why you may decide to close your business. Perhaps you have reached the age of retirement or feel that you are ready to move on to new challenges. Perhaps also your small business is simply not as profitable as you like. Find out about the steps to follow when you’re closing your business.
Legal Dissolution and Liquidation
Decide on a closing date. Ideally, you could use the end of your financial year – this makes the process easier, but it isn’t mandatory. You can choose any date that is convenient for you. On that day, you will need to prepare final accounts, including a balance sheet.
You can then begin to liquidate the business, which means selling off the assets and paying your creditors. The process will vary slightly depending on whether your business is incorporated. At this time, you also need to notify your suppliers about the closure of your business and close your accounts with them.
Depending on the province where your business operates, you may also need to give a public notice of liquidation. This usually takes the form of a small ad in a local newspaper stating the business’s name and the date of its closure. This notice ensures that the public – and therefore potential creditors – know about the liquidation and can make claims if they believe that the business owes them anything.
Once you have taken care of those formalities, you can proceed to the legal dissolution of your business. If you are incorporated, you will need to follow the rules set out in the corporate laws of your jurisdiction. If you are a sole proprietor, you may simply need to strike off any business names you used from business registries in your province.
Dealing With Tax Authorities
Throughout the process, you will need to deal with the Canada Revenue Agency as well as with your provincial revenue authority.
Early on, you should terminate the employment of anyone you had hired and make sure to remit all payroll taxes and income tax deductions to the CRA and the provincial authority. Employees may be entitled to a notice period or an indemnity, so be sure to take a look at the applicable provincial laws.
Likewise, you will need to remit any GST/HST you have collected and file a final return with the CRA – or, in Quebec, to Revenu Québec. You should also file a separate form asking for the CRA to close your account.
Finally, prepare and file a final tax return that runs from the first day of your financial year to the day of dissolution. If this involves a period of less than 12 months, then prorate all calculations, such as credits and income tax brackets. The CRA asks you to include a copy of the articles of dissolution with the final return.