Closing or selling your business
Table of contents
An entrepreneur may leave their business for different reasons, such as a major life change, the desire to pursue a new opportunity, family obligations, or financial concerns. Selling, closing or transferring a business to a new owner can take time and planning. The earlier you start, the more likely it is that you will have a smooth transition.
This guide will give you general information on:
- Selling your business
- Closing your accounts
Exiting your business
Having a succession plan will help you manage transferring the ownership of your business to someone else. You can create a succession plan even if you aren’t selling or leaving the business right away.
Your plan should outline your goals and vision for a change in business ownership. You can also include topics such as training for the new owner(s), timeframes, or roles and responsibilities for the people involved in the transfer.
Developing a succession plan before you leave can save you time in the future.
For more information and resources to help you with succession planning, read online:
Selling your business
The decision to sell your business is the first step in a longer process that may include:
- Selecting professional services
- Evaluating the worth of your business
- Negotiating the price
- Finalizing the sale
If your business is set up as a sole-proprietorship or partnership, you can sell the assets, but you can not sell or transfer the business registration. You must close your business and the new owner must set up their own accounts. It is up to you to settle any outstanding amounts that are owed on your accounts. It is up to the new owner to choose how they want to structure the business, register it and decide whether or not to use the same business name.
Corporations can be sold or transferred to another owner. Because the process of selling or transferring a corporation can be complex, you may want to hire a lawyer and/or accountant to help you.
Evaluating your business' worth
Your business worth will usually include several factors like:
- The selling price of similar businesses in your area
- The total value of your current inventory
- The value of your physical assets and equipment
When evaluating the market value of your business, you may want to hire a professional business evaluator, lawyer and/or accountant to help you. A buyer might also evaluate your business based on your projected cash flow for the next few years. Make sure your books are up to date.
You can get more information from the Business Development Bank’s website.
How to sell your business
Finalizing the sale
Finalizing the sale of your business usually involves a contract or other legal documents. You may want to hire a lawyer to review or prepare the paperwork before you sign. Having a lawyer help with this part of the process can help you avoid legal issues and misunderstandings.
How to negotiate the sale of your business
If you have legal questions, contact a lawyer who deals with business regulations. The Law Society of Upper Canada's Law Society Referral Service may be able to assist you in finding a lawyer or paralegal, based on your needs.
Law Society Referral Service
Closing your business
Sole-proprietorships and partnerships must generally be closed when the owners exit the business, because the ownership can not be transferred. Corporations can be transferred to new owners, but you may choose to voluntarily close a corporation (known as dissolving a corporation).
Closing a sole-proprietorship or partnership
The Master Business Licence for sole-proprietorship, partnership and trade name registrations is valid for 5 years in Ontario. If you have a Master Business Licence and need to cancel it before it expires, visit the ServiceOntario website. The website offers the option to change or close several other accounts too.
Change of business information
Dissolving a corporation
To close an incorporated company and end your operations, you need to file Articles of Dissolution. Follow either the federal or the provincial process of dissolving your business, based on the type of corporation you have.
Dissolution of a federal corporation
Your federal corporation can only be dissolved once it no longer has property or liabilities. After you have liquidated your corporation’s assets and discharged its other liabilities, you need to fill out and submit the Articles of Dissolution to Corporations Canada. If your corporation has shares, share-holders will need to approve the dissolution.
Guide on dissolving a business corporation
Dissolution of a provincial corporation
To dissolve an Ontario corporation, the following documentation must be submitted to the Ministry of Government Services:
- Articles of Dissolution
- Letter consenting to the dissolution from the Ministry of Revenue, must be submitted with the Articles of Dissolution within 60 days of issuance
- Covering letter giving a contact name, return address and telephone number
- Fee of $25.00
Dissolving your Ontario corporation
You will need to account for any leftover assets or inventory, and find out whether or not you will be responsible for paying any HST on the items. Visit the Canada Revenue Agency (CRA) website for more information on closing accounts.
Closing a GST/HST account
Dissolving your accounts
If you are closing your business, there are several accounts that may need to be closed. If you are selling your corporation, or passing it on to a new owner, you should find out if these accounts need to be updated or closed before you leave the business. Each account has its own process and forms to complete to make sure they are properly updated or dissolved. Some accounts that you may have include:
Contact the Canada Revenue Agency (CRA) to close or update your business number account if you have any of the following:
- An HST number
- A payroll account
- A corporation
- An importer/exporter account
Note: When you close your payroll, you will also need to complete and file the T4 and T4A slips and summaries within 30 days of the day your business ends.
Many different words are used to describe situations when employment is terminated. As an employer, it is important to understand the different types of termination and adhere to the rules and regulations of the Employment Standards Act. The act defines different types of termination and outlines how much notice or termination pay you may be required to give to employees. Visit the Ministry of Labour website for more information.
Termination of employment
Record of employment (ROE)
You are legally obligated to issue an ROE for each of your employees when they stop working for you. The ROE must be issued within 5 calendar days of the end of their last pay period for weekly, bi-weekly and semi-monthly pay cycles. To find out more about filling out the ROE and your obligations, read the Canada Business blog post on this topic.
Contact Service Canada:
Record of Employment
Workplace Safety and Insurance Board (WSIB)
If you have a WSIB account, you need to notify them within 10 days of closing your business. You are still liable for any money owing on your account until it is paid. Contact the WSIB directly for more information.
WSIB - Closures
Employer health tax (EHT)
Your employer health tax number is issued by the Ministry of Finance. You will need to notify the ministry that you are closing your business, and file your final EHT return within 40 days. The return must be sent to the ministry with your payment of any amount still owing on the account.
Contact the Ministry of Finance:
EHT final return
If you have any licences or permits from your local municipality, contact them to let them know that you are closing the business. The office that issued your permit or licence should be able to tell you how to cancel or close your municipal accounts.
To determine what municipality your business is in, you can contact the Association of Municipalities of Ontario (AMO).
Association of Municipalities of Ontario
Depending on the type of business you are closing or selling, there may be a number of other accounts that were set up. You may have registered for a licence or permit, based on your industry, location or business activity. Make sure you contact any other organizations or departments that you are registered with to find out how to close the accounts.
If you are having financial difficulties, declaring bankruptcy should be your last resort. First consider other options, such as reworking your budget, consolidating loans or selling assets.
Alternatives to bankruptcy
If you choose to declare bankruptcy, follow the steps specified by the Office of the Superintendent of Bankruptcy.
You may also be interested in the following links that relate to closing or selling your business:
- Opening the door to your exit strategy
- Succession Planning For Farms
- Canadian Institute of Chartered Business Valuators
- What do buyers look for when purchasing a business?
You can also find books, magazines and other relevant print material at business service organizations in your community. To locate a Canada Business Ontario (CBO) community partner, contact us at 1-888-576-4444.