On this page:
- Corporation Tax Payments
- Filing GST/HST returns
- Assessing your responsibility for corporation's debts
A corporation is a separate legal entity. It can enter into contracts and own property in its own name, separately and distinctly from its owners.
It may have some of the following features:
- it is a separate legal entity with a lasting existence
- it can generally raise large amounts of capital (money or other assets) more easily than a sole proprietorship or partnership
- the shareholders cannot claim any loss the corporation incurs
When forming a corporation, the owners transfer money, property, or services to the corporation in exchange for shares. The owners of these shares are shareholders.
You can buy and sell shares of a corporation without affecting the corporation's existence. A corporation continues to exist unless it winds up, amalgamates, or gives up its charter for reasons such as bankruptcy.
You set up a corporation by completing articles of incorporation and sending the documents to the appropriate provincial, territorial, or federal governments.
A corporation has to file a T2 corporation income tax return no later than six months after the end of every tax year, even if it does not owe taxes. It also has to attach complete financial statements and the necessary schedules to the return.
A corporation usually pays its taxes in monthly or quarterly instalments. For more information on instalment payments and the filing requirements for corporations, go to guide T4012, T2 Corporation – Income Tax Guide, or guide T7B CORP, Corporation Instalment Guide, or go to Payments to the Canada Revenue Agency.
The tax year for a corporation is its fiscal period. For more information on corporations, go to Corporations.
Filing GST/HST returns
Corporations also have reporting periods for which they have to file their GST/HST return. For more information on these returns, including reporting periods, go to Goods and services tax/harmonized sales tax (GST/HST).
As a shareholder of your corporation, you have limited liability. This means that you and the other shareholders are not responsible for the corporation's debts. However, limited liability may not always protect you from creditors. For example, if a smaller, more closely held corporation wants to borrow money from a bank or other creditor, the creditor may ask for the shareholder's guarantee that the debt will be repaid. If you agree to this condition, you will be personally liable for that debt if the corporation does not pay it back.
This applies to taxes owing as well. If your corporation owes taxes and has obtained a loan or secured a line of credit, an advance under the loan or line of credit can be seized on account of the corporation's tax arrears. Even though the proceeds of the advance have been paid to the CRA, the corporation is deemed to have received the advance and is liable to the lender as such. When you have personally guaranteed the loan or the line of credit for the corporation, you and the corporation will be jointly accountable for the amounts seized.
Directors may also be liable to pay amounts owed by the corporation if it has failed to deduct, withhold, remit or pay amounts as required by the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan, the Excise Act 2001, and the Excise Tax Act.
For more information on director's liability, go to information circular IC89-2R3, Directors' Liability.
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