What You Need To Know When Exiting Your Business
There may be several reasons that you have decided to exit the business - you are selling it, you are closing the business, or the business is bankrupt. In each case, the legal requirements for exiting the business are different.
Here’s what you need to know.
You are basically selling your business and stepping away from it. You have to ensure there is a smooth transfer of ownership. Your tax service office has to be contacted whenever there is a change in ownership.
In the case of a corporation, it is vital that Canada Revenue Agency (CRA) is informed of the new director’s name and the social insurance number (SIN).
Selling and exiting your business is a fairly simple way to get away with a bag full of money and without having to go through a legal hassle.
Closing your Business
For whatever reason, whether it be that the business is failing, you have lost interest, or an issue has come up, you can close the business and walk away. In such a case, the key is to do so by keeping within the legal parameters and reducing your losses to the bare minimum.
- Cancel your business registration for your sole proprietorship or partnership
- Voluntarily dissolve your corporation
- Close your Retail Sales Tax and Provincial Sales Tax accounts with the appropriate provincial agency
- Shut your payroll accounts with CRA. If you have a My Business Account on the CRA platform, use the ‘Request to close payroll account’ feature.
- Close your Good and Service Tax or Harmonized Service Tax account with CRA.
- Calculate the pension adjustment for your now former employees.
- Prepare and complete a Record of Employment for each former employee.
- Fill out the T4 or T4A remuneration form and send it to the Ottawa Technology Centre within 30 days of ending your business. Provide copies of the forms to your employees.
- Ensure that all the final returns and amounts owed are paid.
File for Bankruptcy
If your business has a large debt that you can’t pay off, no one is willing to buy your brand, and you can’t afford to pay off the business debt, you may want to file for bankruptcy. This needs to be done when you want to exit the business and are bankrupt.
This is a last resort option to deal with your business debt. If you run a sole proprietorship, then bankruptcy will be noted in your personal credit report.
Under bankruptcy, your business assets will be sold to payout the debt. This is where your decision to separate your personal and business finances will benefit you.
Nine out of ten startups fail. If your business is failing and there is no chance of revival, fail fast, cut your losses and exit the business. It is always advisable to take assistance from a law firm so that you exit the business right.