Running a business has several different pitfalls attached to it. One of the most dangerous, and unfortunately one of the most common, is not knowing what taxes to file, and when.
An annual return, known as ‘Annual Filing’ is something you need to do every year, and something you must not forget! If you fail to do so, you will receive an official letter from Corporations Canada which informs you that you have failed to file your return, and you are in default. If you do not file your outstanding return as a matter of urgency, your corporation may be subject to dissolution. This means they can close down your corporation.
The wording sounds harsh, and that is because it is. This is a serious issue and one in which you must ensure you a) adhere to on time, and b) address immediately if you do happen to receive that official-sounding letter.
CORPORATIONS CANADA VS SERVICE ONTARIO?
Corporations Canada is the agency in charge to maintain the federal incorporations to collect and keep all information updated. This task is also completed by service Ontario but for Ontario incorporations and all respective provinces have their own agencies that maintain this task. Think of this agency as a renewal of your health card or driver license except in the case for the federal corporations you need to renew each year. Sounds like a cash grab right?
WHAT IS AN ANNUAL RETURN?
If you have incorporated your business in Canada itself. At that point, you will have decided whether to incorporate provincially or federally. If you have opted for the federal route, you will need to complete an annual return.
This is a document which is legally binding and tells Corporations Canada that you are doing business actively. It also gives them important information on your address and anything else which might have changed, as well as the names of your current Board members. Again, this is about keeping their records up to date. If you fail to do this, you will receive the above described letter from Corporations Canada themselves, and you will need to take action immediately.
The ironic thing is, filing your annual return is very easy to do. It takes just a few minutes to do online and it will cost you just $20 to file your return. It’s that simple. It may be that you give the job to your legal team to complete, as the annual return is in fact a legal document.
If you fail to submit your return and you do nothing about the reminder letter, in theory, Corporations Canada can close your company, although it would take two years to do, as you would normally be given extra time to get the return filed.
ORGANIZATION IS KEY
The seriousness of not submitting key and legal documents to the appropriate governing bodies at the correct times is not to be ignored. In the worst case scenario, your business may be dissolved, and in the best case, you are put through a period of stress and worry until the matter is dealt with and closed.
Whether you deal with such matters as business owner, or you delegate the task to your legal team or other member of your organization, double checking that the correct documents have been filed at the correct time, is key. If you can do this earlier than the deadline, all the better, and the less you have to worry about. After all, your annual return is so quick and easy to do.
HOW TO AVOID THE ANNUAL RETURN?
If you don’t want to deal with an annual return every year than you might want to consider opening an Ontario corporation which does cost a bit more up front but there’s no extra compliance related to annual filings. However, if you would like to do business Canada wide it makes more sense to incorporate a Federal incorporation and deal with the $20/per fee per year.
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- Written by: Jag Bath