A business shut down permanently in March 2020 (when Ontario ordered the closure of non-essential workplaces).
The owner is now realizing he still has to file his T2 returns even though the business shut down.
We are working on the tax year September 2019 – August 2020 currently as that is the last unfiled year (the business became inactive in March 2020).
My question is can we file a final return for the 2019-2020 tax period and then he can proceed to the next steps? e.g. contact a lawyer for the dissolution process
Or do we need to now get all his tax returns caught up to the present date which would include the above dates and:
You will need to file all periods even if there is nil income.
Corporations are activated, maintained, and dissolved at the provincial or territorial level. Each province or territory maintains it’s own business corporations registry. Some provinces work in co-operation using the “extra provincial incorporation” whereby the head office location is registered in one province and additional provincial locations are filed as an “extra provincial incorporation” at a much lower fee. In this case there is one business entity operating actively in multiple provincial or territorial jurisdiction. Some provinces have tight integration with CRA such as Ontario as far as registry is concerned. You will need to verify the current rules.
A Corporation is alive unless or until there is either a voluntary dissolution filed at Ontario Corporations, or, if there was an involuntary dissolution due to failure to file the “annual returns”. These “annual returns” are the annual fees and forms which report controlling shareholders and which may update addresses and/or directors and/or articles of incorporation. The date of dissolution can not be back date or future dated. The date of dissolution occurs when the voluntary dissolution is filed or when the involuntary dissolution is struck.
The “date of dissolution” of a corporation is the date of it’s death. Like Lazarus a corporation may be revived for a specified period of time after dissolution. This revival may be either continuous, ie back dated to the date of dissolution, or, effective the date of revival. After a specified period grace period for revival has passed that corporate entity is truly and forever dissolved or dead.
The fact that there was no active income is a moot point when it comes to “date of dissolution”. Therefore, you will need to file all periods up to the date of dissolution even if there is nil income.
CRA refers to the provincial corporation registry to determine the effective dissolution date of the corporation. None the less there are forms to complete and file to close the CRA business number accounts.
CRA RC# --The RC (corporation) business number closes on the same date as the certified date of dissolution.
CRA RT# - The RT (GST-HST) number may be closed on either the certified date of dissolution, or, on an earlier date such as the last date of income. The benefit of maintaining the GST# open is to capture and claim the ITC’s. The earlier date can be obtained through a CRA advanced queue live agent or auditor.
CRA RP# - similar to GST-HST above.
CRA RZ# - dividends - usually at the close of business
CRA RZ# - Construction contractors - similar to GST-HST above.
REFERENCES
How to dissolve an Ontario Corporation.
Ontario Corporations
Dissolving a corporation in Ontario
CRA - Closing CRA business number accounts
CRA - Closing CRA GST-HST business number accounts
RC145 Request to Close Business Number Program Accounts
Your client probably does NOT need to pay a lawyer for this - I have done it on behalf of a number of clients over the years and it was always pretty straightforward, but I haven’t tried it since Ontario biz registry went online OR since CRA stopped processing the annual returns…
Important to document dissolution properly to avoid fraud. Hearing of cases where bad actors revive corps, obtain credit and leave directors holding the bag where not properly dissolved
Dan Chun, CPA, CGA
Partner, Business Advisor
DIRECT 778.313.1703 PH. 250.763.8919 TOLL FREE 1.877.766.9735 600 - 1628 Dickson Avenue Kelowna, BC V1Y 9X1 dan.chun@mnp.ca mnp.ca
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Something else to confirm… if the company hasn’t been active were the annual returns still filed? If not, maybe it’s already been struck from the registry (involuntary dissolution). Or it’s about to be, since it’s usually struck after 2 years of non-filings (in Alberta anyway). If it has been involuntarily dissolved that date becomes the final date of the last year end, unless they pay the annual fee revive it.
Also, from past experience, you can’t e-file a return for a company that has been involuntarily dissolved, or at least that’s how it used to be.
Mel has a very good point. The provincial corporate registry requires annual returns to filed with is a combination of the fees and confirmation of address and shareholders. Most provinces provide a grace period for late filing and late payment.
I work with a local corporate registrar and run a corporation historical search with a certified copy. This type of search shows the following information:
date of incorporation
history of annual returns filed
list of any outstanding annual returns
history of shareholder changes
history of director changes
history of changes to the articles of incorporation
history of revivals, if any
history of address changes, if any
It is a best practice to run this type inquiry and updating the corporate return book before finishing the year end bookkeeping and finalizing the corporate tax return.
@dan.chun has hit the nail properly right on the head _/
.
@mel
You mean that there would actually be people out there calling themselves accountants who would be so totally incompetent as to be preparing T2s without obtaining a copy of the provincial annual filing for each year for their working paper file? OMG
Directors should be aware how very deep they can get in the do-do if they don’t hire proper expertise to deal with the correct dotting of the i’s and crossing of the t’s and the compliance with the #'s … or it will come back to bite them…
@dan.chun – Maintaining a corporate record book and filing a certificate of dissolution at the close of a business is a best practice if you are no longer interested in maintaining the business name or entity, and, if you have disposed of all your assets by sale or transfer to personal use.
Here in Nova Scotia, a company’s registration is revoked when the annual fee/form submission has not been done. Reactivation involves paying double the usual fee. This does not close the corp, so CRA rightly assumes it still exists.
The 'strike-off" process can take forever. There doesn’t seem to be a set time frame for this. The Registry will send out 2 letters to the last known address of the registered agent, and subsequently strike the name from the registry. I’ve seen this take 10 years.
My standard response when a client wants to close out their corp is to give them the 2 options:
Pay a lawyer and have it done sooner rather than later, or
Let the registration lapse and wait to be struck off.
If option 2 is chosen, CRA will eventually demand a T2. Standard response then is to have the client call CRA and tell them that the company has ceased operations, no assets or liabilities remain, neither the agent or shareholder(s) have the ability to complete a T2, and there is no money to hire an accountant to do it. Then, hang up.
Date of Incorporation. This is the open date of the corporation. This has be a match between the provincial registry and the CRA T2 return.
Date of last payment for an annual provincial corporation registration return.
Date of dissolution. This is the day the business is considered closed by province and by CRA. No T2 returns may be filed for periods after this date.
Date struck. This is the date upon which the provincial registrar closes a corporation due to non-payment. The effective date of dissolution of the corporation reverts back to that date paid. If the payment is late there is grace period, often about 2 years, during which the corporation shows active but unpaid. After the grace period is over, there is an “involuntary date of dissolution” which reverts back to the last date paid.
Date of revival. For an additional grace period a corporation can be revived after closure for a fee which is less than the original corporation registration fee. The revival can be immediate, on the current date, retroactively, or continuously back to the date of last payment, as long as the missing annual returns are filed and paid. The revival issues a new corporate certificate.
Date of voluntary dissolution. This is the date of closure based upon payment and filing at the provincial registrar to request closure. That is the only way to be sure on which date the corporation is closed.
You do not need a lawyer to file a corporate certificate of dissolution. It is a very simple form which can be filed with a provincial registry office, a Canada wide registry office, or, even using a provincial motor association. Some provinces use their own services only or in addition to third party corporate registry service providers. The cost varies widely from province to province.
In Nova Scotia there appears to be no cost to file this form online but you do need a signed form. It is unclear for the online page if the signature needs to be notarized. Again this does not need to be expensive. In Calgary, there are several small law firms which accept a small donation which they remit to a charity of their choosing to notarize a form. You can file online or via a pdf.
There are many online third party businesses which will handle some or all aspects of corporate filings and corporate record book maintenance. One such business which was a sponsor of the 2022 Certified Professional Bookkeepers of Canada’s Ignite Conference was Ownr. I have no experience with this business.
Not here, it isn’t. The struck off date is not back dated to the last paid return. Companies are not struck off until the Registrar publishes a notice in the Gazette. And that’s after they’ve sent 2 letters to the registered agent. And that is years after the last paid return.
I had a client a few years back whose company, although not operating anymore, had a corporate tax balance owing (roughly $35K). He wanted to wind-up his company. I warned him that he personally assumes liabilities of the company upon a wind-up and advised him to talk to a lawyer. He didn’t and I set him free. Liability assumption would also happen if a provincial agency winds-up the company. It’s also a good reason to have a lawyer involved. Not all liabilities are on the balance sheet.
Two assets:
-Cash in the bank ($10,000)
-Equipment ($500.00 - net book value and FMV is even lower)
One liability:
-Shareholder loan ($9,000)
Once all the tax returns are filed, dissolution is completed, and those services are paid for and whatever amount remains in the bank is used to pay back the shareholder loan credit balance there will be a small shareholder loan credit balance remaining.
OMG