Canadian businesses are required to submit a dissolution notice upon closure. Sole proprietorships and partnerships submit a form titled “Dissolution or Change of Proprietorship (or Partnership)” to the provincial Corporate Registry office, while corporations submit an “Application for (Voluntary) Dissolution” to the same office. Additionally, corporations must provide a copy of their corporate articles of dissolution and a final corporate tax return to the CRA.
It is important for corporations to complete their filings on time to avoid any legal repercussions that may arise due to non-compliance with the CRA. Any failure to complete the necessary filings may result in the corporation being required to file in subsequent tax years, regardless of whether there is any income to declare. This can be a significant burden for corporations, especially those that are struggling financially. In addition to this, any future tax debt that the corporation may incur will be added to the existing amount owed to the CRA. This can be a significant financial burden that may be difficult for corporations to manage. Failure to deal with this debt can lead to the CRA raising Director’s Liability against the directors, which means that the personal assets of the directors may be at risk. Another potential consequence of failing to complete the necessary filings is the raising of a s.160 / s.325 non-arm’s length assessment. This type of assessment is designed to re-capture any dividends that were paid out while money was still owing to the CRA. This can be a significant financial burden for corporations, especially those that rely on dividends to fund their operations. In order to avoid these potential consequences, it is important for corporations to ensure that they are completing all of their filings on time and in accordance with CRA regulations. This will help to ensure that the corporation remains in good standing with the CRA and that its directors are not at risk of personal liability. By working with an experienced tax professional, corporations can ensure that they are meeting all of their obligations and avoiding any potential legal issues that may arise.