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Canadian Incorporation for United States Residents

US Corporations can do business in Canada


US Corporations can do business in Canada. They have to comply with local laws, which may involve registering as an extra-provincial corporation in each province where they have sufficient presence, setting up various sales tax (e.g. HST) accounts, and remitting certain taxes to the Canadian tax authorities. Canada generally has lower corporate tax rates than in the USA, although this may have changed given the recent tax cut in the United States. Consider setting up a separate Canadian corporation if the Canadian portion of your business earns enough profit in Canada to make it worthwhile to take advantage of the differing corporate tax rates or if you prefer to keep liability from your Canadian operations away from your US operations.


US Resident Individuals can do business in Canada


Individuals who are US residents can take advantage of the North American Free Trade Agreement (NAFTA) to obtain visas allowing them to work in Canada. We suggest you refer to a guide such as those published by Self Counsel Press to determine what visa you should apply for, or consult a qualified immigration professional (we can provide a referral). You only need a visa if you plan to work in Canada. If you can conduct the business from the US, for example, as an internet-based business, you don't require a visa if you don't plan to travel to Canada.

Individuals usually want to incorporate to benefit from the limited liability afforded by corporations to its shareholders. If a corporation suffers losses, it must bear those losses to the extent of its own resources, and not the personal assets of the individual shareholders. Be aware, though, directors and officers of a corporation can be personally liable to pay debts owed by the corporation to the government, for certain debts owed to employees, and for other specific issues having to do with environmental contamination or breaches of securities laws.


What Corporate Structure is Best for Me?


US resident individuals can easily start a Canadian corporation to conduct business in Canada. What is more difficult is to decide whether to use a US corporation or a Canadian corporation to conduct business in Canada, whether to incorporate a federal (Canada) corporation, or a provincial incorporation such as in British Columbia, and whether to own the shares in the Canadian corporation through a US corporation or LLC or individually or through a trust. Be sure to consult with your US tax adviser to determine which structure might best suit your needs.


Don't forget that you may have to file IRS Forms


US tax residents who own shares in certain foreign corporations including Canadian corporations are required to file IRS Form 5471. Similarly, US tax residents who form trusts in Canada are required to file IRS Form 3520-A. There are significant penalties for failure to file such forms. Other filing requirements may also apply, such as those under FATCA (Foreign Account Tax Compliance Act) or FBAR reports (Report of Foreign Bank Account and Financial Accounts).


Gain the INC Business Lawyers Advantage:


  • We can help you choose a corporate structure which is best for you.
  • We can help you form trusts to enjoy the superior asset protection and lower corporate tax rates available in Canada.
  • In some cases, we can help you obtain a Canadian bank account. Be aware that, over the last number of years, Canadian banks have made it more difficult for non-residents of Canada to open corporate bank accounts. In general, from the perspective of the bank, they require a meeting in person with all directors of the corporation.


Incorporate federally or in any province in Canada!


You can incorporate federally or in any province you wish -- there is no legal requirement that says you have to incorporate in each province in which you conduct business. A general rule-of-thumb is to incorporate in the province that your company has its principal operations, especially if your business is primarily within a single province. Some businesses choose to incorporate federally to get Canada-wide name protection, although this requires having at least 1/4 of your directors as Canadian residents. Other businesses choose to incorporate in British Columbia because BC does not require Canadian resident directors.


Please do not hesitate to contact us if you have any questions, or continue to our Incorporation Instructions Form now.


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