E-NEWSLETTER SIGNUP
“I am shutting my company down. I was told that the company would be automatically closed after two years if I stopped doing the annual filing.”
It is common for small business corporations to close their companies when they are no longer actively running them. And while the “2-year” statement might be correct in regards to the BC annual filing requirements, it does not satisfy their tax obligations.
When companies voluntarily decide to close their business, they are required to file all tax returns up to and including the date of dissolution. If they do not file for dissolution and choose to wait out the two years, they are still required to file all corporate tax returns, GST returns and any other tax return that applies.
If you have chosen to close your business, we recommend that you file a voluntary dissolution for the following reasons:
- Reduce professional fees. If you do not dissolve the company, depending on your year-end date and when your annual report is due, you will have at least 1 more corporate tax return to prepare and file. In our experience, it is often 2 years of filings.
- CRA can review/audit your company records for a period of 3 years from the time that you are assessed. If you let the company sit dormant and you do not dissolve it yourself, the period that CRA can review/audit your records is much longer.
- We were advised recently that due to COVID shutdowns, the automatic dissolution for BC was not being done as usual, therefore, the 2-year period has been extended which will result in even more years of professional fees and CRA’ss ability to review/audit.
For these reasons, we generally recommend filing a voluntary dissolution when you are ceasing business operations. We always recommend seeking professional advice on these matters too.
Have a question? Email or call us. And remember to check out our blogs, checklists and social media pages for more information on all things small business, tax, accounting and the Tri-Cities community.
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.