CRA: Closing a business
Canonical checklist: final GST/HST return, final corporate return, T4 final payments, payroll account closure, Business Number cancellation.
CRA: Closing business accounts →Stage · Self-employed money in Canada
Exit: winding up, selling, or transitioning
Most self-employed Canadians eventually face one of three exits: sell the business, wind down and file final returns, or gradually transition the business into retirement. The tax planning for each is materially different and benefits from years of lead time.
What to do this week
- Define your exit horizon. Sale within 2 years requires immediate cleanup: clean books, documented processes, customer contracts. Sale 5+ years out allows tax-planning flexibility.
- If selling: investigate the Lifetime Capital Gains Exemption (LCGE). Sells of Qualified Small Business Corporation shares can be exempt from tax up to ~$1M (2026 limit). Requires CCPC structure and specific holding periods.
- If winding up: plan the last-year tax bill. Selling off assets triggers deemed dispositions. Final corporate returns, T2 wind-up elections, and T4 final payments all require specific timing.
- If transitioning to retirement: coordinate with overall retirement plan. Self-employed income to age 70 vs earlier RRSP/CPP conversion has different optimal paths.
- Review insurance: key-person, disability, buy-sell agreements. Especially relevant if you have partners or the business has material value.
What to avoid
- Selling the business without LCGE-qualifying structure in place. The $1M+ lifetime exemption is a six-figure tax saving on a successful sale, but requires the shares to qualify, which typically needs 24+ months of specific conditions before sale.
- Paying off all corporate retained earnings as dividends in one year to close the corporation. Bunches income into one tax year at the top rate. Spread over multiple years when possible.
- Leaving corporate accounts and registrations open 'just in case' after wind-up. Ongoing compliance costs continue until formal dissolution.
- Treating a business sale as purely a transaction. Buyer due diligence on a small business typically surfaces years of sloppy bookkeeping. The highest price goes to the cleanest business.
Calculators for this stage
Forms to file at this stage
CRA: Lifetime Capital Gains Exemption
Reference for qualifying for the LCGE on sale of qualified small business corporation shares.
CRA: Capital gains folios →Frequently asked
What is the Lifetime Capital Gains Exemption?
A federal tax exemption on the sale of Qualified Small Business Corporation (QSBC) shares or Qualified Farm/Fishing Property. 2026 limit is approximately $1,016,000 per individual. Requires specific CCPC structure and holding conditions. One of the biggest single tax savings available to self-employed Canadians who sell a business.
How do I value a small business?
Common approaches: multiple of annual earnings (typically 2-5x EBITDA for small professional services), asset-based valuation (for asset-heavy businesses), or discounted cash flow (for growing businesses). For any sale over $250K, hiring a Chartered Business Valuator is usually worthwhile.
Can I keep my Business Number forever even after stopping?
No. Once the business is dormant or closed, cancel the BN and any associated program accounts (GST/HST, payroll). CRA expects activity; dormant accounts can trigger correspondence and penalties for missed filings.
What happens to my corporation when I die?
Shares of the corporation have fair market value at the date of death, triggering deemed disposition and capital gains tax. Rollover to a surviving spouse available; succession to children requires tax planning. Estate freezes (pre-death) can materially reduce this exposure.