Business Dissolution Lawyer in Toronto, Canada
In its most recently available data, Statistics Canada reports as of October 2021, there were 901,794 active businesses in the nation. In that same month, 39,216 businesses closed for good, following a trend dating back to June 2021, which showed an average of about 40,000 closings a month.
In addition, the pandemic has taken its toll on many businesses, and some have been forced to shutter. But even in good times, business closures happen for several reasons: poor cash flow, poor management, competition, and internal disputes among owners or partners.
If your business is floundering and you’re considering that you may have to dissolve it in Toronto, Canada, contact Matthew R Harris Law P.C. today. Dissolution is not usually a simple process, such as closing your doors and putting an “out of business” sign on the front. There are legal and tax liability issues to be resolved.
Lawyer Matthew Harris can help you and your business navigate the legal hurdles involved in dissolving your business so that once the process is over, you can rest assured that your obligations and liabilities are fulfilled. He also serves clients in Hamilton, London, and Ottawa.
Dissolving a Sole Proprietorship
When you open a sole proprietorship in Ontario, Canada, you must obtain an Ontario Master Business Licence, also called an Ontario Business Registration. This licence gives you the legal authority to run your business, open a business bank account, obtain business loans, pay taxes, and so on.
To dissolve your business, you must cancel your Master Business Licence. Canceling removes future liability and the possibility of litigation after your business has been shuttered. It also notifies all financial institutions that your business is no longer functioning.
You must also notify the Canada Revenue Agency (CRA) that you’re closing and make good on any taxes you owe.
Dissolving a Partnership
Some partnerships, called fixed-term partnerships, dissolve automatically when their term expires. Otherwise, a partnership can be dissolved by one partner, by a joint decision of all partners, when one partner dies or becomes insolvent, or when a court orders the dissolution for “just and reasonable” cause.
When the partnership is dissolved the partners are entitled to have the firm’s assets sold and applied to outstanding debts and liabilities. Any surplus can be divided among the partners according to their original partnership agreement or split evenly while factoring in any debts a partner may owe to the company.
Just like a sole proprietorship, a partnership must cancel its Master Business Licence and pay all taxes owed.
Dissolving a Corporation
Dissolving a corporation is a more complicated process, depending on whether or not shares have been issued. Dissolution of a corporation must begin with the approval of shareholders for a special resolution. If there is more than one class or group of shareholders, each must pass a resolution. If there are no shareholders, the board of directors can pass a resolution.
The special resolution, or resolutions, authorizes the board to distribute any property and discharge liabilities, following the articles of incorporation submitted when forming the business.
Then, to officially dissolve the corporation, the first step is to apply to the Ministry of Finance, requesting its consent to dissolve. If there are any taxes owed, the ministry will deny consent. Once tax matters are resolved the ministry will issue a Letter of Consent to Dissolve. Once consent is received, the corporation has 60 days to make its application for dissolution to the Ministry of Government and Consumer Services.
Along with an application fee and the Letter of Consent, the corporation must submit two sets of Articles of Dissolution.
Business Dissolution Lawyer Serving Toronto, Canada
As you can see, business dissolution is more involved than simply filling out a form and submitting it. You must hire an experienced, knowledgeable lawyer who can guide you through the process to prevent exposing yourself to future liability. If your business is located in Toronto, Hamilton, London, or Ottawa, contact Mathew R Harris Law P.C. Lawyer Matthew Harris will help you meet all the requirements of legal business dissolution.