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BC LLP: the New Delaware LLC

The British Columbia limited liability partnership ("BC LLP") is the new alternative for the Delaware LLC.

For international businesses seeking to create a business structure in North America, the Delaware LLC was a popular choice for because it is easily formed and provides a flow-through structure with no US income taxes owing at the level of the LLC itself. (Members of LLC were responsible for income taxes in their applicable tax jurisdiction.) Delaware was also an excellent jurisdiction because of its reputation for having efficient, business-friendly courts. Because of Delaware's strong reputation, it was usually easy to open a bank account where required.

However, the coming into force of the Foreign Account Tax Compliance Act (FATCA) has now rendered the Delaware LLC a dangerous structure for most foreigners (non-US citizens). Further, tax compliance in the US for a Delaware LLC is now expensive and time consuming. The rules are complex. Those using Delaware LLC's may want to consider, under suitable legal and tax advice, moving the structure to a more favourable jurisdiction.

For non-US citizens looking to form a new international business structure, one alternative to consider is the BC LLP.

Under Canada's income tax system, a BC LLP, just like the older, longer-established forms of partnership, is a flow-through structure--which means that the income earned (or losses incurred) in the partnership is usually taxed in the hands of the partners and not at the level of the partnership itself. As a general rule, non-residents who carry on business in Canada--whether through a corporation or a partnership--will pay business taxes in Canada based on that Canadian-conducted business. Even then, those businesses will be pleased to find that tax compliance in Canada is relatively simple compared to most other reputable jurisdictions. On PWC's 2017 rankings for ease of tax payments, out of 190 economies, Canada is ranked 17th compared to 36th for the US. But a BC LLP does not need to carry on business in Canada. Partnerships that do not carry on business in Canada will be taxed in their home jurisdictions or those of the underlying partners. Many businesses base themselves in reputable jurisdictions with broad tax treaty networks, such as The Netherlands, Switzerland, and Singapore. Canada has tax treaties with many such jurisdictions. (Tax treaties exist in order to reduce the risk of double taxation. International businesses will also want to consider withholding tax rules.)

BC LLP legislation requires that the proposed partners enter into a partnership agreement, but the agreement itself allows considerable flexibility of terms--that flexibility in some respects being limited only by the wishes of the partners in consultation with their advisers.

Unlike limited liability partnership statutes in some other provinces of Canada, BC partnership law allows a BC LLP to be used for any type of business. The BC LLP confers a form of "full-shield" limited liability, which is similar to a corporation, although partners themselves can still be held liable in certain cases.

Conducting business through a BC LLP is easy. Many businesses refuse to do business with foreign corporations located in jurisdictions perceived to be geographically distant or to have unfair or unreliable legal systems. Most businesses will agree to do business with a BC LLP because dispute resolution in British Columbia courts is rightfully perceived as being impartial and fair, and Vancouver BC is a well-respected international arbitration centre. Opening bank accounts is made easier because British Columbia is a trusted jurisdiction. Many BC LLPs with non-Canadian partners choose to open a bank account in Canada in order to take advantage of the excellent reputation and lower risks of holding deposits in the Canadian banking system. Where the partnership needs to open a bank account outside Canada, we can provide the equivalent of apostilled copies of the BC LLP constating documents for that purpose.

Many international businesses have difficulty finding an acceptable payment gateway supplier. A BC LLP usually enjoys the advantage of using one of the excellent Canadian payment gateway suppliers. Savings on the payment gateway supplier costs are often considerable, which makes the BC LLP a more economic choice for your business structuring solution.

Contact Stuart Moir, lawyer, for more information, at 604-272-6960 extension 102, or by email at stuartmoir@incorporate.ca. Or complete and email us the BC LLP instruction form using the link below. Having the form helps us to answer your questions. Almost all of our services are provided on a flat fee basis. We make it easier for you to choose the best structure and to budget your business start-up expenses.

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Or download our LLP Instructions form now.

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