Should I sell my business or close it?

Selling and closing are two different ways to end your time as owner. A sale passes the business, or its assets, to someone else. A closure winds the business up: what it owns is dealt with, what it owes is paid, and its accounts are shut. This page sets out what each path involves so you can ask better questions. It does not tell you which to choose. BDC says that selling your business may be one of your most consequential business decisions.

What closing a corporation involves

Corporations Canada’s guide to dissolving a federal business corporation says a corporation can be dissolved only when its property has been distributed and its liabilities have been discharged. Its examples of the acts required include collecting the corporation’s property, disposing of property that is not to be distributed in kind to shareholders, and discharging all of the corporation’s obligations. The guide adds that a bankrupt corporation cannot request to be dissolved under the Canada Business Corporations Act. A company incorporated under a provincial statute follows that province’s rules, so confirm which law governs yours.

Closing your tax accounts

The Canada Revenue Agency says that if you decide to close your GST/HST account, you must notify it and give the reason for closing. You will also need to file a final GST/HST return and remit any amounts you owe. The CRA adds that it considers you to have sold each property, other than capital property, that you held for consumption, use or supply in a commercial activity, and that you remit GST/HST on the fair market value of those properties just before closing and report it on the final return. Ask your accountant which other accounts, such as payroll or corporate income tax, have their own closing steps and final filings in your situation.

What a sale changes

In a sale, the business can carry on under someone else. Which contracts, employees and liabilities go with it depends on how the deal is structured. An asset sale and a share sale split those things differently and can differ in how long closing takes; see Does an asset sale or a share sale take longer to close? for that comparison.

Retirement money and timing

The Canadian Federation of Independent Business notes that most entrepreneurs don’t have pensions and rely on the ultimate sale of their business, together with the protection of the lifetime capital gains exemption, as their retirement plan. If that is true for you, ask your accountant how a sale and a closure would each be taxed on your numbers. For the timing side, read When to sell your business.