Closing or Selling Your Business

Table of Contents

Introduction
Succession Planning
Selling Your Business
Closing Your Business
Dissolving Your Accounts
Bankruptcy
Other Resources

Introduction

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:

• Planning
• Selling your business
• Closing your accounts
• Bankruptcy

Read also:
Exiting your Business

Succession Planning

Having a succession plan (sometimes called an exit strategy) helps you manage how you will transfer 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 an exit strategy before you leave can save you time in the future.

For more information and resources to help you with succession planning, read online:
Succession Planning

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 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

When evaluating the market value of your business, you may want to hire a professional business evaluator, lawyer and/or accountant to help you. 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

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.

Read online:
What's your Business Worth?

Negotiating the Price

When you sell your business, you need to negotiate a price with your potential buyer(s). The price that you are asking for may be different than the price the buyer is willing to pay. Make sure you plan and set your boundaries ahead of time.

Read online:
Negotiations

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.

Legal Questions

If you have legal questions, contact a lawyer who deals with business regulations. The Law Society of Upper Canada's Lawyer Referral Service may be able to assist you in finding a lawyer, based on your needs.

Contact the Law Society of Upper Canada:
1-800-268-8326
Law Society of Upper Canada's Lawyer 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.

Use online:
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.

Read online:
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

Read online:
Dissolving your Ontario Corporation

Inventory

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.

Contact CRA:
1-800-959-5525
Non-capital property held at the time of closing a GST/HST account
Capital property held at the time of 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:

Business Number

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.

Contact CRA:
1-800-959-5525
Closing Accounts
Employer Restructuring / Succession of Employers

Dismissing Employees

When you dismiss your employees you need to follow the rules and regulations of the Employment Standards Act. The act outlines how much notice or termination pay you are required to give to employees, based on how long they have worked for you. Visit the Ministry of Labour website for more information.

Read online:
Termination of Employment

Record of Employment

You are legally obligated to issue a Record of Employment (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.

Read online:
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.

Contact WSIB:
1-800-387-0750
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:
1-866-ONT-TAXS (1-866-668-8297)
EHT Final Return

Municipal Licences

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).

Contact AMO:
1-877-426-6527
Association of Municipalities of Ontario

Other Accounts

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.

Bankruptcy

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.

Read online:
Alternatives to bankruptcy

If you choose to declare bankruptcy, follow the steps specified by the Office of the Superintendent of Bankruptcy.

Read online:
Declaring bankruptcy

Other Resources

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

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 through the Business Info Line at 1-888-745-8888.

Need more information?

Click: Canada Business
Call: The Business Info Line, a collaboration between ServiceOntario and Industry Canada, at 1-888-745-8888
Visit: Find a Community Partner Location near you

Disclaimers

Information contained in this document is of a general nature only and is not intended to constitute advice for any specific situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Some of the organizations listed above are not subject to the federal Official Languages Act or the French Language Services Act of Ontario. Their services may not be available in both official languages.