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- Introduction: Winding-up a Corporation and Corporate Law. Under Part XVI of the Business Corporations Act (Ontario), a winding-up involves a corporation's assets being sold or distributed, its debts and liabilities being settled and its shares being cancelled.
- Tax Reasons for Winding-up a Corporation. The winding-up of a corporation can be an effective tax planning tool that can be used for various reasons including, but not limited to
- Significant Legal Concepts – Taxable Canadian Corporation, Subsidiary, Parent Corporation, and Subsidiary body corporate. To better understand the wind-up rules under the Income Tax Act, this section discusses the following significant concepts: taxable Canadian corporation, parent corporation and subsidiary body corporate.
- The Definition of Winding-up Under the Income Tax Act. The term "wind-up" is not defined under the Income Tax Act. Subsection 84(2) of the Income Tax Act applies in the context of winding-up the business conduct of a corporation or winding-up the corporation's existence.
Oct 1, 2021 · A Q&A guide to tax on corporate transactions in Canada. This Q&A gives a high level overview of tax in Canada and looks at key practical issues including, for example: the main taxes, reliefs and structures used in share and asset sales, dividends, mergers, joint ventures, reorganisations, share buybacks, private equity deals and restructuring ...
- Overview
- Business number (BN)
- Change of ownership
- Value of the inventory and other assets
- Capital gains deduction
- Tax implications
- Note
- Forms and publications
- Related links
When selling your business or even part of your business, there are things that you need to know. The following information will help you when selling your business:
Payroll
If the business you are selling has employees, you must close your payroll account. For more information on how to close your payroll accounts, see Changes to your business entity in Guide T4001, Employers' Guide – Payroll Deductions and Remittances.
Goods and services tax/harmonized sales tax (GST/HST)
If the business you are selling has a GST/HST account, you must contact your tax services office to close the account. For more information, go to Closing a GST/HST account.
It is important that you contact your tax services office whenever an owner of a sole proprietorship, a partner in a partnership, or a member of a corporation's board of directors changes.
Depending on your business structure, a change of owner(s) will have a different impact on your business. Depending on your partnership agreement and whether or not your business was registered using the legal names of each partner or the provincially registered partnership operating name, it could trigger a legal name change or require the registration of a new Business Number (BN) and CRA program accounts. For corporations, it is important that we have the correct name and social insurance number (SIN) for each director.
If you are selling your business or part of your business, you generally set an amount for the entire business. In some cases, your sales agreement sets out a price for each asset, a value for the inventory of the company and, if applicable, an amount that can be attributed to goodwill.
Depending on your situation, you may have a recapture or a terminal loss of capital cost allowance (CCA) on the sale of your assets.
If you realized taxable capital gains from the disposition of qualified farm property or qualified small business corporation shares, you may be eligible to claim a capital gains deduction. For more information, go to Line 25400 – Capital gains deduction.
If you are selling your business, you may be able to jointly elect with the purchaser to have no GST/HST payable on the sale. You can make this choice if the following two conditions apply:
•you are selling the business that you established or carried on
You may also be eligible to make this election if you are selling part of your business. For information on what constitutes "part of a business," go to Form GST44, Election Concerning the Acquisition of a Business or Part of a Business.
Any property not acquired under the agreement but that the purchaser needs to carry on the business has to fall within the remaining 10% of the fair market value (FMV) of all the property acquired. For example, when real property, such as land and a building, is not included in the supply but is purchased elsewhere, it and any other property purchased should not exceed 10% of the FMV of all the property required to carry on the business.
As well, the purchaser has to be capable of carrying on the same kind of business that you established or carried on with the property that the purchaser has acquired under the agreement.
This election can only be filed by either:
•a registrant when selling to another registrant
•a non-registrant when selling to either a registrant or a non-registrant
•Guide T4001, Employers' Guide – Payroll Deductions and Remittances
•Guide RC4022, General Information for GST/HST Registrants
•Claiming capital cost allowance (CCA)
•Closing CRA program accounts
•Line 9947 – Recaptured capital cost allowance
•Line 9948 – Terminal loss
•Business and industry
•Innovation, Science and Economic Development Canada
The corporation usually deducts its liquidation expenses, such as professional and filing fees, on its final tax return. Generally, a corporate liquidation can take one of two forms. The corporation either sells off the assets and distributes the cash to the shareholders or distributes the assets directly to the shareholders.
Oct 1, 2021 · Pay off any liabilities - It’s important that all loans, credit cards, bills, taxes, etc. are paid before you shut down the corporation. Once paid off, you can close any credit card accounts. Ensure that there is no more business activity - Cancel any PAD agreements, recurring credit card transactions, etc, going through any corporate credit ...
Jul 25, 2022 · Liquidation of company assets: How does the distribution of assets during liquidation work? When a company is liquidated, its assets are sold off and the proceeds are distributed to creditors. The distribution of assets is first used to pay off secured creditors, then unsecured creditors, and finally shareholders.
People also ask
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Jul 16, 2024 · The assets and liabilities should be derecognised in accordance with the relevant standard. For example, IAS 16 or IAS 38 is relevant to non-financial assets. The gain or loss on the sale of individual assets is measured as the difference between the net disposal proceeds and the carrying amount of the asset at the date of disposal.
