Cost to Dissolve a Corporation Calculator
Closing a corporation costs more than the filing fee, because the money left inside it has to come out and most of that is a deemed dividend in your hands. Work out the catch-up filings, the government and professional cost, the tax on the wind-up, and how many weeks the whole thing takes.
fees plus tax on the wind-up
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What the Dissolution Costs Before Any Tax
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The Tax on the Wind-Up, and What Reaches You
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The Order of Work and How Long Each Stage Takes
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Points That Decide This
What to Do Next
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Disclaimer: On the winding-up, discontinuance or reorganisation of a corporation’s business, subsection 84(2) of the Income Tax Act deems the corporation to have paid a dividend equal to the amount by which the funds or property distributed to shareholders exceeds the reduction in the paid-up capital of the shares, so retained earnings cannot be handed out tax-free merely because the corporation is closing. Subsection 88(2) governs the winding-up of a Canadian corporation and, with paragraph (j) of the definition of proceeds of disposition in section 54, generally excludes the deemed dividend from the proceeds on the disposition of the shares, which is why this calculator does not tax the same money twice; the capital gain or loss it computes is measured on the paid-up capital returned against the adjusted cost base of the shares, which is a simplification of a rule that in practice depends on the full composition of the distribution. A capital dividend may be paid out of the capital dividend account as defined in subsection 89(1) only where an election under subsection 83(2) is made in prescribed form and manner on or before the earlier of the day the dividend becomes payable and the day part of it is paid, and a late election attracts the penalty in subsection 83(4), so the election cannot be left until after the corporation has ceased to exist. A dividend refund is available under subsection 129(1) only against taxable dividends actually paid in the year, computed at 38 and one third per cent of those dividends and limited to the refundable dividend tax on hand balances described in subsection 129(4), so an unrecovered balance is lost when the corporation is dissolved. A loan owing by a shareholder may already have been included in income under subsection 15(2) with relief under subsection 20(1)(j) on repayment, and settling or forgiving such a loan on a wind-up can produce a further inclusion, so the direction of the balance matters. Subsection 159(2) requires a legal representative to obtain a clearance certificate before distributing property and subsection 159(3) imposes personal liability for distributing without one. The GST/HST registration is cancelled under section 242 of the Excise Tax Act and a final return is required for the reporting period in which the registration ends, and payroll accounts generally require final T4 slips and a closing remittance. The voluntary dissolution provisions of the Business Corporations Act (Ontario) and the Canada Business Corporations Act each require the corporation to be in good standing and to have provided for its liabilities, and a dissolved corporation can in some circumstances be revived to deal with matters left outstanding, which costs more than completing them in order. The government filing fee, professional fees, personal tax rates, capital gains inclusion rate and the number of weeks at each stage in this calculator are illustrative round figures and allowances, not published service standards or quoted prices, and every one of them should be replaced with the current published figure or your own quote before any decision is taken. This page is general information, not tax advice.
What It Actually Costs to Dissolve a Corporation
The government filing fee is the smallest part of the bill. What makes a dissolution expensive is everything that has to be true before the registry will accept the articles: the returns filed, the books reconciled, the CRA accounts closed and the property inside the corporation accounted for.
For a dormant Ontario or federal corporation with a few unfiled years, the professional cost of getting current is usually several times the registry fee. For a corporation that still holds cash or property, the tax on getting that property out is usually larger again than the professional cost, and it is the part owners do not see coming.
There are three separate bills, and they are easy to confuse. The registry fee to file the dissolution, the professional cost of catch-up filings and the final return, and the personal tax you pay on receiving what is left. The calculator above keeps them apart, because only the first two are negotiable.
Subsection 84(2): Why the Money Cannot Simply Come Out
This is the heart of it. On the winding-up of a corporation’s business, subsection 84(2) of the Income Tax Act deems a dividend to have been paid to the extent that the funds or property distributed to shareholders exceed the paid-up capital of the shares. The excess over paid-up capital is a dividend in your hands, taxed at dividend rates, in the year of the distribution.
Paid-up capital is almost always nominal. A corporation incorporated with one hundred dollars of share capital has one hundred dollars of paid-up capital, whatever it has earned since. So a corporation sitting on two hundred thousand dollars of retained earnings distributes two hundred thousand dollars and roughly all of it is a deemed dividend, not a return of your own money.
That is why the calculator asks for paid-up capital separately from retained earnings, and why the two are rarely the same. Owners frequently assume that money already taxed once in the corporation comes out clean. It does not. The corporate tax was the first layer and the dividend tax is the second, which is the integration the system is built on.
The deemed dividend is a non-eligible dividend unless the corporation has a general rate income pool to designate against. Non-eligible dividends carry the higher personal rate, so please use your own bracket in the calculator rather than the round example, and please check whether any of the distribution can be designated as eligible before it is paid.
The Share Disposition, and Not Counting the Same Money Twice
The shares themselves are disposed of on the wind-up, which is a separate event from the deemed dividend. Subsection 88(2) governs the winding-up of a Canadian corporation, and the definition of proceeds of disposition in section 54 generally strips the deemed dividend out of the proceeds so that the same amount is not taxed as both a dividend and a capital gain.
What is left as proceeds is broadly the paid-up capital returned to you. Measured against the adjusted cost base of your shares, that produces a small gain, a small loss, or nothing at all in the typical owner-managed case where both figures are the nominal subscription price.
Where it matters is the corporation whose shares were bought rather than subscribed for, or whose cost base was stepped up in an earlier reorganisation. There the adjusted cost base can far exceed the paid-up capital returned, and the wind-up produces a capital loss that may be available against gains elsewhere. The calculator shows this as a loss rather than a saving, because whether it can be used depends entirely on your other transactions.
| Event on the Wind-Up | Provision | Measured Against | Taxed As |
|---|---|---|---|
| Distribution over paid-up capital | Subsection 84(2) | Paid-up capital of the shares | Deemed dividend |
| Capital dividend election | Subsection 83(2) | Capital dividend account balance | Tax-free |
| Disposition of the shares | Subsection 88(2), section 54 | Adjusted cost base of the shares | Capital gain or loss |
| Repayment of a loan you made | Return of the debt | The balance owing to you | Generally tax-free |
| Loan you owe being settled | Subsections 15(2), 84(2) | The balance owing by you | Income or dividend |
The Capital Dividend Account Is a Use-It-or-Lose-It Asset
The capital dividend account holds the untaxed half of the corporation’s capital gains, the untaxed portion of life insurance proceeds it has received, and capital dividends received from other corporations. A dividend paid out of that balance, where the election under subsection 83(2) is made properly, is received entirely tax-free.
The timing is unforgiving. The election has to be filed in the prescribed form on or before the earlier of the day the dividend becomes payable and the day any part of it is paid, and a late election carries a penalty. More to the point, the corporation has to still exist to pay the dividend and to make the election.
Once the corporation is dissolved, the capital dividend account is gone and cannot be recovered. A balance that would have come out tax-free instead comes out as part of the deemed dividend, or does not come out at all. Please check the balance before you file anything, because this is the single most expensive thing to get wrong on a wind-up.
The order is therefore fixed: confirm the balance, prepare and file the election, pay the capital dividend, and only then wind the corporation up. Our capital dividend account balance calculator works out what the balance should be from the underlying transactions, which is usually a more reliable figure than the one carried in the accounts.
Refundable Dividend Tax on Hand Disappears With the Corporation
A corporation that earned investment income paid an additional refundable layer of tax on it, tracked as refundable dividend tax on hand. That tax is refunded only when the corporation pays a taxable dividend, at thirty-eight and one third per cent of the dividends paid, and only up to the balance it has.
If the corporation is dissolved without paying a taxable dividend, the balance is simply lost. There is no mechanism to claim it afterwards and no successor to inherit it. For a holding company that has carried an investment portfolio for years, that balance can be substantial.
The planning point is the mirror image of the capital dividend account. There you want the tax-free dividend paid first; here you want a taxable dividend paid deliberately, sized so that the refund it triggers is worth the personal tax on the dividend itself. The two are usually paid in the same wind-up, and the sequence and the amounts are worth modelling rather than guessing.
The Shareholder Loan, in Both Directions
Which way the loan runs changes the answer completely, and the two cases are routinely confused because both sit in the same place on the balance sheet.
Where the corporation owes you money, repaying it on the wind-up is a return of the debt and is generally tax-free. It reduces what is available to distribute as a dividend, which is helpful, and it is the first thing to take out of a corporation that is closing.
Where you owe the corporation money, the balance has to be dealt with before the corporation ends. Amounts owing by a shareholder may already have been included in income under subsection 15(2), with relief on repayment under subsection 20(1)(j). Settling or forgiving the loan on a dissolution is not a neutral act: it is a distribution of the receivable to you, and it can produce a further income inclusion. The cheapest answer is usually to repay it in cash before the wind-up begins.
Please do not net the two directions. A corporation that owes one shareholder and is owed by another has two separate problems, and treating the balance as a single net figure produces the wrong tax in both hands.
The Order of Work, and What Goes Wrong When It Is Skipped
Sequencing is what people get wrong. The dissolution is the last step, not the first, and filing it early creates problems that cost more to unwind than doing the work in order would have cost.
- Reconcile the books for every open month, because the returns depend on them.
- File every outstanding T2, oldest first, and deal with the assessments and any penalties or interest.
- Confirm the capital dividend account balance and the refundable dividend tax on hand balance.
- File the capital dividend election and pay the capital dividend.
- Pay any taxable dividend needed to recover the refundable balance.
- Repay or settle the shareholder loan in whichever direction it runs.
- File the final GST/HST return and close the registration; file final T4 slips and close the payroll account; obtain a WSIB clearance and close that account.
- Prepare the final short-year T2 to the date of dissolution, and request a clearance certificate before distributing the remaining property.
- File the articles of dissolution with the Ontario Business Registry or Corporations Canada.
Dissolving with open accounts or unfiled years does not make them go away. CRA accounts stay open, demands continue to issue, and the returns remain due. A dissolved corporation can in some circumstances be revived to deal with what was left outstanding, and reviving one then filing everything costs considerably more than filing everything first. If the corporation is already behind, the corporate tax cleanup comes before the dissolution, and the Ontario corporation revival cost calculator shows what the alternative looks like.
| Shortcut Taken | What Usually Happens |
|---|---|
| Dissolve with unfiled T2 years | Returns stay due, demands continue, revival may be needed |
| Dissolve with the GST/HST account open | Notional assessments and arrears interest on a closed business |
| Dissolve before the capital dividend election | Tax-free room lost permanently |
| Dissolve without paying a taxable dividend | Refundable balance lost permanently |
| Distribute property before a clearance certificate | Personal liability for the corporation’s unpaid tax |
| Leave a loan owing by the shareholder outstanding | Income inclusion on settlement or forgiveness |
Dormant is not the same as dissolved. A corporation that has stopped trading still has to file a T2 for every year, even a nil one, and still has to file its annual return with the registry. Keeping the shell alive is a decision to keep paying for compliance, and it is only worth it where the corporation will be used again or still holds something of value. Our unfiled T2 catch-up cost calculator prices that alternative.
What This Calculator Does Not Cover
- Involuntary and administrative dissolution, where the registry cancels the corporation for failing to file, and the revival that follows
- Bankruptcy and insolvency, including proposals and assignments, where a corporation cannot pay its creditors and voluntary dissolution is not the route
- Corporations with employees part way through a year, including termination pay, final source deductions and the timing of the T4 information return
- Non-resident shareholders, where Part XIII withholding applies to the deemed dividend and the rate depends on the treaty
- Real property, where a transfer out of the corporation can attract land transfer tax and a separate capital gain
- Amalgamation as an alternative, where rolling the corporation into a related one avoids the distribution entirely
- Director liability surviving dissolution, for unremitted source deductions and GST/HST, which does not end with the corporation
- Provinces beyond Ontario and the federal jurisdiction, each of which has its own fee, forms and good-standing requirements
- The lifetime capital gains exemption, which applies to a share sale rather than a wind-up and can make selling the corporation better than closing it
A wind-up done in the right order is a fixed piece of work with a known cost. Our corporate tax return filing service covers the catch-up years, the final short-year T2, the account closures and the clearance certificate request.
Frequently Asked Questions
Dissolving an Ontario or federal corporation, the cost and the tax.
Related Calculators and Guides
More tools for winding up, catching up and closing a corporation properly.
Close the Corporation in the Right Order
Tell us the jurisdiction, the years outstanding and what is left on the balance sheet. We will price the catch-up work, rescue the capital dividend account and the refundable balance before they are lost, and take the dissolution through to the registry.