Winding Up a Corporation

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Winding Up a Corporation

July 31, 2012

Tax Question:

What are the steps to wind up a corporation?

Facts:

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.

Discussion:

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 would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.