Closing a Business in Ontario: A Step-by-Step Guide
Closing a business in Ontario requires following legal steps to ensure compliance with government regulations, tax obligations, and business dissolution procedures. Whether you’re shutting down a sole proprietorship, partnership, or corporation, this guide will walk you through the Ontario business closure process and help you avoid penalties.
Why Close a Business Properly in Ontario?
Before diving into the steps, it’s crucial to understand why properly closing a business in Ontario is necessary:
- Avoid legal liabilities related to outstanding taxes or debts
- Prevent future tax filings and unnecessary fees
- Cancel business licenses and permits to ensure compliance
- Dissolve corporate status if applicable, to formally close operations
Now, let’s go through the necessary steps.
How to Close a Business in Ontario: Step-by-Step Process
Step 1: Complete the Cancellation or Dissolution of the Business
As noted above, your business is either a registered business or a corporation.
A Registered Business:
A Business Name Registration (BNR) previously known as a Master Business Licence (MBL) falls under the Business Name Act. These registrations include
- Sole Proprietorship
- General Partnership
- Trade Names (the trade names can be cancelled separately from the incorporated business.
What Information is Required to Cancel A Registered Business?
To cancel a registered business, the same information you provided when registered is required including the following:
- Name of Business
- Business Identifier Number (BIN) available on your registration form
- Company Key
- Business Activity
- Address of Business
- Individual Information including legal name, address
- Name of Person Submitting the Form
An Incorporated Business:
A corporation is a continual business operation that unless dissolved will continue in perpetuity. A corporation can be either profit or not for profit. The Ontario Corporations Act (OCA) and the Ontario Not-for-Profit Corporations Act (ONCA). If the business you wish to close is a corporation (a corporation will have a legal ending such as Inc./Incorporated, Ltd./Limited, Corp./Corporation.
Dissolving a Corporation in Ontario
If your business is incorporated, you must formally dissolve it by:
- Filing Articles of Dissolution
- Ensuring all corporate tax returns are filed and cleared
- Settling employee terminations and final payroll obligations
Skipping this step can result in corporate tax obligations continuing even if the business stops operations.
These are the types of corporation in Ontario you can dissolve:
- Ontario Named or Numbered Incorporation
- Ontario Not For Profit Incorporation
- Ontario Charitable Incorporation
- Ontario Professional Incorporation
To cancel an Ontario incorporated company by filing the Articles of Dissolution, the following information is required:
- Name for incorporated company
- Ontario Corporate Number (OCN)
- Company Key number
- Selection between whether the corporation has commenced business or not
- Head office address
- Previous office address if applicable
- Current Director details for corporation
- Selection of date for dissolution
- Name of individual authorized to complete the dissolution of the corporation
Step 2: Notify the Canada Revenue Agency (CRA)
You must inform the CRA when closing a business in Ontario. This involves:
- Filing final tax returns (GST/HST, payroll, and corporate income tax)
- Paying any outstanding balances or requesting tax clearance
- Canceling your Business Number (BN) and GST/HST account
Step 3: Cancel Business Licenses & Permits
Depending on your industry, you may need to cancel business licenses at the provincial and municipal levels. This applies to:
- Municipal licenses and zoning permits
- Professional or trade licenses
Failing to cancel permits can result in renewal fees even after your business is closed.
Step 4: Close Business Bank Accounts & Settle Debts
- Pay off business loans, leases, and outstanding invoices
- Notify suppliers, clients, and service providers
- Close business bank accounts and credit cards
Legal Requirements For Business Closure in Ontario
Do You Need a Tax Clearance Certificate?
A Tax Clearance Certificate is required if you’re dissolving a corporation in Ontario. It confirms that no outstanding tax liabilities exist with the CRA.
Employee Termination Laws in Ontario
If your business has employees, follow Ontario’s employment standards when issuing termination notices and final payments.
- Provide written notice of termination
- Pay severance and outstanding wages
- Issue final T4 slips for tax filing
Failure to comply with Ontario’s Employment Standards Act can result in legal claims from employees.
Tax Obligations When Closing a Business in Ontario
Final Corporate Tax Filing
Corporations must file a final T2 corporate tax return within six months of business closure.
HST/GST Cancellation
Businesses registered for GST/HST must file a final return and deregister their GST/HST account.
Payroll & WSIB Closure
- File final payroll source deductions and issue employee T4s
- Close your WSIB (Workplace Safety and Insurance Board) account
Frequently Asked Questions (FAQs)
How Long Does it Take to Close a Business in Ontario?
The process varies but can take a few days depending on tax clearance and legal filings.
Can I Close a Business Without Paying Taxes?
Yes, you can file the cancellation for a registered business or Articles of Dissolution typically prior to clearing all outstanding tax obligations before business closure.
Do I Need a Lawyer to Close a Business in Ontario?
The process to either cancel or dissolve an Ontario business is fairly easy and straightforward. You may want to consult a business lawyer to ensure legal compliance.
How Much Does it Cost to Cancel My Registered Business?
The cost to cancel an existing registered business is $109.99 to complete the documentation with the province to put an end date to the operation of the business
How Much Does it Cost to Dissolve a Corporation in Ontario?
To file Articles of Dissolution in Ontario, the fees are $163.90 plus filing and government fees.
How Do I Close My Business Account in CRA?
For business program accounts such as payroll and HST, you can file the RC145 form.. This can be completed by you or an authorized representative for your business such as a bookkeeper or accountant.
What to do With the Assets of the Business?
When closing your business, you are able to sell or liquidate the assets of the business. You can also donate the assets to a number of charities in Canada including the Kidney Foundation of Canada, Habitat for Humanity and the Salvation Army among others that take in physical items to sell them for the benefit of the community. By doing this, you have the ability to use the donations as a tax write off.
Ontario Business Central Inc. has helped thousands of Canadian entrepreneurs to close their businesses. We help make the transition easy so you can move on to other things in your life with an ease of process.
inquiries@ontariobusinesscentral.ca
Toll-Free: 1-800-280-1913
Local: 1-416-599-9009
Fax: 1-866-294-4363
Office Hours: 9:00am – 5:00pm
Monday – Friday E.S.T.
Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.
