Dissolving a Corporation: What You Need to Know
Running a corporation can be a challenging task, and at times it may become necessary to dissolve it. Dissolution is the process of ending a corporation’s existence legally. There are different reasons why a corporation may need to be dissolved, such as financial struggles or a change in business goals. Regardless of the reason, dissolving a corporation requires careful planning and attention to legal requirements. In this post, we will discuss what you need to know about dissolving a corporation in Ontario.
Steps to Dissolve a Corporation in Ontario
- Hold a Shareholders Meeting
Before dissolving a corporation, a meeting of the shareholders must be held to approve the dissolution. The meeting must be properly documented, and the minutes of the meeting must be kept in the corporate records. The shareholders must vote to approve the dissolution, and the vote must be recorded in the minutes.
- Notify the Government
Once the shareholders have approved the dissolution, the next step is to notify the government. In Ontario, the Articles of Dissolution must be filed with the Ministry of Government and Consumer Services. The Articles of Dissolution are a legal document that must be completed accurately and in full. Once the Articles of Dissolution are filed, the corporation is officially dissolved.
- Settle Any Outstanding Liabilities
Before dissolving a corporation, all outstanding liabilities must be settled. This includes paying off any debts, taxes owed, and any outstanding bills. Failure to settle outstanding liabilities could result in legal action against the corporation or its directors.
- Notify Creditors and Other Parties
After the government has been notified of the dissolution, the corporation must notify its creditors and other parties. This is done to inform them of the corporation’s dissolution and to provide them with instructions on how to make any claims against the corporation.
- Cancel Business Licenses and Permits
The final step in the dissolution process is to cancel any business licenses or permits that the corporation may hold. This includes canceling any tax accounts with the Canada Revenue Agency.
Tax Implications of Dissolving a Corporation
Dissolving a corporation may have tax implications, and it is essential to understand these implications before proceeding with the dissolution. In Ontario, there are different tax requirements depending on whether the corporation is considered a small business corporation (SBC) or not. If the corporation is an SBC, there may be a tax benefit to the dissolution. However, if the corporation is not an SBC, there may be a tax liability upon dissolution. It is important to seek advice from a tax professional to understand the tax implications of dissolving a corporation.
Conclusion
Dissolving a corporation can be a complicated process, and it is essential to follow the legal requirements carefully. By taking the necessary steps, settling outstanding liabilities, notifying government and other parties, and understanding the tax implications, the dissolution process can be completed smoothly. If you are considering dissolving your corporation in Ontario, it is important to seek advice from a legal professional to ensure that you are following the correct procedures and complying with all legal requirements.