Inactive Corporation: What You Still Have to Keep Up

The annual return or report

Every jurisdiction below expects a yearly filing that confirms the corporation’s address, directors and other details. Being inactive doesn’t change that.

• Canada, federal: an annual return to Corporations Canada within 60 days after the anniversary date, with the information on individuals with significant control (CBCA s. 263). Corporations Canada says a corporation must file as long as it hasn’t been dissolved.
• Ontario: an annual return through the Ontario Business Registry, due by the deadline for the corporation’s tax return, six months after the year-end (Corporations Information Act s. 3.1). There is no fee.
• British Columbia: an annual report within two months after each anniversary of incorporation (Business Corporations Act s. 51).
• Alberta: an annual return by the end of the month after the anniversary month (Business Corporations Act s. 268; Business Corporations Regulation s. 24).
• Quebec: an annual updating declaration to the enterprise registrar, filed with the CO-17 tax return or between May 15 and November 15, and the annual registration fee (Act respecting the legal publicity of enterprises ss. 45 and 80).
• Delaware: an annual franchise tax report by March 1 (8 Del. C. § 502).
• California: a Statement of Information every year, during the anniversary month of incorporation or the five months before it (Corporations Code § 1502).

Tax returns and minimum taxes

Tax authorities in both countries expect a return every year until the corporation is dissolved, even with no income and no tax to pay.

• CRA: inactive corporations file a T2 return for every tax year, even if no tax is payable, within six months after the year-end. A corporation that was inactive all year with nothing to report can leave out schedules 100, 125 and 141.
• Revenu Québec: a corporation with an establishment in Quebec files a CO-17 every year, with or without tax to pay, and attaches a balance sheet for a year in which it was inactive.
• IRS: every domestic corporation that isn’t tax-exempt files Form 1120 whether or not it has taxable income. An S corporation files Form 1120-S while its election is in effect, and the late-filing penalty applies even when no tax is due, per shareholder for each month it is late.
• Delaware: franchise tax is owed for every year the corporation is on the state’s records, whatever it did: at least $175 under the authorized shares method or $400 under the assumed par value capital method (8 Del. C. § 503), plus a $50 filing fee.
• California: the $800 minimum franchise tax is owed every year from incorporation until dissolution, whether the corporation is active, inactive or losing money (Revenue and Taxation Code § 23153). New corporations don’t pay it in their first taxable year.

Corporate-law duties continue too

Corporate statutes don’t ask whether the corporation is busy. The annual shareholders’ business, the registered office and the records all continue.

• Hold the annual meeting or sign the annual written resolution: receive the financial statements, elect the directors and deal with the auditor (CBCA ss. 133, 142 and 155; Ontario ss. 94, 104 and 154; British Columbia s. 182; Alberta ss. 132, 141 and 155; Quebec ss. 163, 178 and 225; Delaware § 211).
• Keep a registered office where official notices will actually reach you (CBCA s. 19; Ontario s. 14; British Columbia s. 34; Alberta s. 20), and in the US keep the registered agent current (Delaware §§ 131 and 132).
• Keep the registers and corporate records up to date. The federal and Quebec statutes also require accounting records to be kept for six years (CBCA s. 20; Quebec s. 34).
• Report a change, such as a new address or director, when it happens rather than waiting for the next annual filing.
• For wording and a checklist, see the annual meeting waiver resolution and the annual corporate minutes checklist.

What happens if the filings lapse

Missed filings don’t close a corporation in an orderly way. They lead to penalties, then to dissolution or a void charter imposed by the government. Revival is usually possible, but it means catching up on what was missed and paying the fees.

• Canada, federal: the Director may dissolve a corporation that is a year in default on a filing or fee (CBCA s. 212). Corporations Canada’s practice is to dissolve after two years without a filing. A dissolved corporation can apply to be revived, with recent annual returns and a fee (s. 209).
• Ontario: after a missed annual return or tax filing, the Director gives notice, and the corporation is dissolved if it doesn’t comply within 90 days (OBCA s. 241). It can be revived on application.
• British Columbia: a company that doesn’t file its annual report in two consecutive years can be dissolved (s. 422) and later restored (ss. 355 and 356).
• Alberta: the Registrar may dissolve a corporation that is a year in default on a filing (s. 213). It can’t be revived more than 10 years after dissolution (s. 208).
• Quebec: the registrar may cancel the registration of a corporation that misses two years of updating declarations, which dissolves a corporation constituted in Quebec. The cancellation can be revoked by filing the missing declarations and paying what is owed (Act respecting the legal publicity of enterprises ss. 59, 63 and 66).
• Delaware: if the franchise tax goes unpaid for a year, the charter becomes void (8 Del. C. § 510). Revival requires paying the back taxes, penalties and interest (§ 312).
• California: the Franchise Tax Board can suspend a corporation that doesn’t file or pay (Revenue and Taxation Code §§ 23301 and 23301.5), and one suspended for at least 60 months can be administratively dissolved (Corporations Code § 2205.5). Revivor requires every missing return and payment (Revenue and Taxation Code § 23305).

Inactivity alone can be grounds for dissolution

Under the federal and Alberta statutes, the government may also dissolve a corporation that hasn’t carried on business for three consecutive years, even if its filings are current (CBCA s. 212(1)(a)(ii); Alberta s. 213(1)(b)). Both statutes require 120 days’ notice first, so watch the corporation’s mail and email, and respond before the deadline if you intend to keep it.

Keep it, or close it properly

Keeping an inactive corporation costs a set of filings and an accountant’s time every year, and a minimum tax in Delaware or California. If you have a reason to keep it, such as a holding company or a plan to restart, treat those as fixed yearly costs. If you don’t, dissolving it formally ends the obligations; walking away from it doesn’t. In California, for example, unpaid minimum tax for a corporation that stopped doing business can be abated only if the corporation dissolves (Revenue and Taxation Code § 23310).

A yearly routine for an inactive corporation

• File the annual return or report, and pay any annual fee or minimum tax.
• File the corporate tax return, even if it shows no income.
• Sign the annual shareholders’ resolution and approve the financial statements where the law requires it.
• In Canada, renew the auditor waiver if the corporation uses one.
• Confirm the registered office, registered agent, directors and officers are still correct.
• File everything in the minute book. If years are already missing, start with the minute book cleanup checklist.

Common questions