Business Structure Fiasco


Several years ago I incorporated a company here in Canada.

I have only filed returns as a sole proprietor:T2125 and not any T2s.

Can I just file the past due T2s as no net income and dissolve the corporation and continue on as a sole proprietor? Suggestions?

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I think you have a problem ... and I'm not the one to help as I don't have experience your type of situation.

I do know that inactive corporations must file a tax return every year, even if no tax is owing.

What I'm not sure of ... and what you need to see a CA or CGA about ... is whether there are negative consequences of forming the corporation but then running the business and filing the business as a proprietorship. Probably not ... but I don't know without further research and specific details on your situation.

Many accountants give a free consultation, prior to engaging them, where you can ask your questions. Your other option is to call CRA.

If it is determined there is no tax owing, there should be no late filing penalty (as it's based on a percentage of tax owing). If CRA has served a demand to file notice, there will probably be penalties for not filing when required to do so ... but again, these are usually based on balance due.

If this is the case in your situation, make sure you ask the person you are speaking with about the voluntary disclosure program when you speak with your accountant or CRA.

One other avenue you may want to check out is a web site that says they specialize in late filing of tax returns ... You will have to due your own due diligence prior to engaging their services as I do not have first hand knowledge of their reputation or the quality of their work.

Sorry I can't be more help.

Comments for Business Structure Fiasco

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Dec 31, 2016
BIG problem
by: Anonymous

You have a big tax problem.

You can't be sole proprietor in your corporation, meaning if you are a Director in your corporation all income you receive from your corporation has to be reported on T4 or T5.

If you reported income received from your corporation on form T2125 on your personal tax return you will run in problems both on your T2 and T1 returns.

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