How to Close a Business in Ontario: A 2025 Guide

Looking at how to close a business in Ontario?

We know it’s not as simple as locking the doors and walking away.

Whether you're closing due to retirement, financial challenges, or a strategic decision, understanding the proper steps can save you from costly penalties and legal issues down the road. 

This guide outlines the essential steps to close your Ontario business properly.

What Does Business Closure Really Mean for You and Your People?

Business closure isn't just a legal process; it's a significant life event for everyone involved. 

Your employees are facing job loss, uncertainty, and major life changes. 

As a business owner, you're managing your own emotions while carrying the weight of these decisions.

From an HR perspective, proper closure means more than just checking boxes. It's about:

• Supporting your people through a difficult transition
• Maintaining trust and respect even during challenging conversations
• Protecting your reputation as an employer
• Meeting all legal obligations while treating people fairly
• Creating closure that allows everyone to move forward

For corporations, you'll file Articles of Dissolution with the Ontario Business Registry. 

Sole proprietorships and partnerships have simpler legal processes, but the people-related responsibilities remain just as important.

Step 1: Support Your People Through the Transition

How you communicate closure news matters deeply. Consider:

• Timing your announcement: Give people as much notice as possible while balancing business realities and confidentiality needs.
• Being transparent: Share what you can about the reasons for closure, the timeline, and what it means for them.
• Providing written information: Follow up verbal conversations with clear documentation about their entitlements and next steps.
• Offering support resources: Consider providing career transition services, resume assistance, or referrals to help ease their job search.

Business closure involves some of the most difficult conversations you'll have as a leader. 

Our employee relations services provide hands-on support to help you navigate these sensitive situations with clarity, empathy, and legal alignment.

Understanding Employee Entitlements

Your people have legal rights when your business closes, and honoring these rights is both a legal requirement and the right thing to do. 

Under Ontario's Employment Standards Act, you must provide:

• Termination pay: One week's pay for each year of service, up to 8 weeks maximum.
• Severance pay: If your payroll exceeds $2.5 million annually, employees receive one week's pay per year of service (no maximum).
• Outstanding compensation: All earned wages, vacation pay, overtime, and benefits must be paid according to required timelines.

Mass Termination Considerations

If you're closing and terminating 50 or more employees within four weeks, you must notify the Ministry of Labour in advance:

• 50-199 employees: 8 weeks' notice
• 200-499 employees: 12 weeks' notice
• 500+ employees: 16 weeks' notice

These notice periods give your team time to prepare and are required in addition to individual termination obligations. 

Use this time to support your people meaningfully, not just fulfill a legal requirement.

Step 2: Manage the Financial and Tax Obligations

While supporting your people is paramount, you also need to handle the financial side of closure properly to avoid personal liability and future complications.

Close Your Tax Accounts Properly

• Corporate tax: File your final T2 return within six months of closure, including any gains or losses from asset sales.
• GST/HST: Submit your final return and deregister your account. Be aware of potential input tax credit recapture on remaining assets.
• Payroll: Close your CRA payroll account after final remittances and issue T4 slips to your team by the last day of February following closure.

Remember that directors can be personally liable for unpaid taxes, so completing these steps thoroughly protects you long-term.

Handle Assets and Inventory Thoughtfully

You'll need to account for everything your business owns: equipment, inventory, intellectual property, and more. 

Your options include selling assets to generate funds for final obligations, distributing to shareholders after debts are paid, or donating to charitable organizations for potential tax benefits.

Step 3: Navigate Legal Requirements with Care

For Ontario corporations, filing Articles of Dissolution is your formal legal step. 

Before filing, you must:

• Hold a directors' meeting to approve dissolution
• Satisfy all debts or make proper arrangements
• Distribute remaining assets to shareholders appropriately

The dissolution becomes effective once the Ontario government processes your filing.

Close Business Registrations and Accounts

Systematically close or cancel:

• Business name registrations
• Industry licenses and permits
• Bank accounts and business credit cards
• Commercial leases and service contracts
• Insurance policies and benefit plans

Your People-Centered Closure Timeline

Creating a comprehensive closure plan that balances legal requirements with care for your people requires specialized expertise. 

6-12 Months Before Closure

This is when you're making the difficult decision and beginning to plan. At this stage:

• Consult with HR, legal, and tax advisors to understand your full obligations
• Begin financial planning for closure costs, especially employee entitlements
• Review all contracts and commitments
• Consider how to support your people through the transition

Our HR strategy services help you develop a practical roadmap for closure that aligns with your business goals while protecting everyone's interests and maintaining dignity throughout the process.

3-6 Months Before Closure

Now you're preparing for the human side of closure:

• Plan your communication approach—who will be told when and how
• Prepare written materials explaining entitlements and timelines
• Begin conversations with customers and suppliers about transitions
• Start connecting with resources that can support your team (career counselors, recruiters)
• Identify any mass termination notice requirements

1-3 Months Before Closure

The closure is becoming real for everyone:

• Have termination conversations with care and respect
• Process final payments and benefits accurately
• Support your team's job search efforts where possible
• Finalize customer and supplier transitions
• Complete asset liquidation and inventory clearance

Final Month

You're completing the formal closure steps:

• File Articles of Dissolution and final tax returns
• Close all business accounts
• Submit final regulatory filings
• Archive important records (keep for 7 years)
• Distribute any remaining assets

Life After Closure: What to Expect

Even after your business officially closes, some responsibilities continue. 

Directors may remain personally liable for certain obligations, like unpaid wages or source deductions. 

You'll need to retain employment records, tax documents, and regulatory filings for 4-7 years, depending on the type.

Be prepared to respond to potential employee claims, tax audits, or other inquiries that may arise after closure. 

Conclusion

Closing a business is never just about paperwork and procedures.

It's about people, relationships, and the legacy you leave behind. 

How you handle closure reflects your values as a leader and affects everyone involved, from your team members to your broader professional community.

By approaching closure thoughtfully, communicating with honesty and compassion, and meeting all your obligations to your people, you can navigate this difficult transition with integrity.

Ready to navigate your business closure with both confidence and compassion? 

Contact TROIS Collective today to discuss how our people-centered approach can help you handle every aspect of closure.