What are the steps to wind up a corporation?
When winding up a corporation, there are many issues to be aware of that may trigger tax. There also may be some tax savings opportunities that will be lost if not considered and used before wind up.
Steps to follow when winding up a corporation:
- What is the value of the assets of the corporation? This is essential because the corporation cannot just cease to exist for CRA tax administration purposes. These assets need to be transferred to the owners or sold. This will have a tax impact.
- If you are going to be continuing the business as a proprietorship, ensure the proprietorship is registered for GST before you transfer the assets. The transfer of assets can be GST exempt if both the old corporation and the proprietorship are registered by filling out a GST Form 44.
- Double check that all the expenses of the corporation have been recorded and paid.
- Ask your lawyer to close the corporation. At this point in time, the corporation will have no assets and only one liability, the shareholder’s loan.
- File the last GST return to the date of wind up. Do not apply to close the GST account. It should close automatically when the registrar of companies acknowledges the corporation is wound up.
- File the last payroll (T4) returns. This is usually done in February of the next year, but can be done early.
- File your personal tax returns for the calendar year of the close of business. These returns will have to disclose the closing of the corporation.
If you plan to wind up a corporation or would like help with succession planning, please contact us to determine the best timing and the steps to take to ensure you don’t miss any tax savings opportunities.