The sad truth is that only 33 per cent of the province’s small businesses have returned to normal sales levels. The average Ontario small business has taken on nearly $170,000 in new debt just to survive the past two years, and many are dealing with ongoing challenges related to labour shortages, supply chain disruptions, and rising prices. As a result, regrettably, business closings are predicted to continue in the near future. In this post, we look at the steps to take when closing down a sole proprietorship, a partnership, or a corporation.
Closing a sole proprietorship or partnership business
Sole proprietorships and partnerships must generally be closed when the owners exit the business, because the ownership cannot be transferred. The first step is to review your partnership agreement to see what it allows you to do. Once all partners agree to the closing, you can then notify your clients and post the closing on your website. You can sell a sole proprietorship or partnership just as you can sell a corporation.
Dissolving a corporation
Corporations can be transferred to new owners, but you may choose to voluntarily close your corporation, known as “dissolving”, and end your operations. This requires filing Articles of Dissolution. Follow either the federal or the provincial process of dissolving your business, based on the type of corporation you have.
For all three types of business
Whether your business is a sole proprietorship, a partnership, or a corporation, you need to take the following actions:
Cancel your Master Business Licence
The Master Business Licence for sole-proprietorship, partnership and trade-name registrations is valid for five years in Ontario. If you have a Master Business Licence and need to cancel it before it expires, we can guide you through those steps at HNPC.
Manage your rental lease
If you’re renting, review your rental lease with regard to the notice period for closing up. Then notify your landlord within that time frame to avoid a penalty. If you do not want to terminate your lease, you may be able to sublet the property, depending on the terms and conditions of the lease. Review your lease agreement for these details.
Send out notifications
Notify your utility providers and all of your suppliers that are closing your business. Post a notification on your website that your business is closed.
File your taxes
Make sure all your filings and your taxes are up to date, and that you don’t owe unpaid taxes.
Whether it’s a sole proprietorship, a partnership, or a corporation, in order to qualify for bankruptcy, you need to confirm that your debts exceed your assets or sales. Speak with a bankruptcy trustee for more information and guidance on this.
Helping you to move on
Closing a business can take time and planning. The earlier you start, the more likely it is that you will have a smooth transition. At Howard Nightingale Professional Corporation, we have the experience and expertise to guide you through all the steps involved in closing a business. We share insights about how other entrepreneurs are managing a similar situation, and the steps you can take to move on. Please reach out to us for assistance at our Toronto office at 416-663-4423 or toll free at 1-877- 224-8225.