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Canadian Owning Pass-Through US Based Companies


farnamstreet
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I'm digging into a bit of the tax implications of a Canadian owning (5-25% of) US based LLC / S corps (effectively pass through companies).

 

I've googled the basics, but have yet to talk to a Canadian that owns, say 5% of a US S corp without paying 80% tax.

 

I'm hoping that someone on the board has done some research on this or owns 5% or more of a US based S Corp.

 

Thanks!

 

 

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Complicated. Start here for an overview of the problems and the changes, then review the tax treaty amendments, then check the policy changes since the amendments. The quagmire causes us to suggest that Canadians avoid the US flow through structures like the S Corp and the LLC or hire expensive tax professionals if you wish to persist. Most foreigners who used to use the US LLCs for international structures, which does not apply to you, are now better off using BC LLPs primarily because of the introduction of oppressive and ruthless IRS reporting rules.

 

http://www.collinsbarrow.com/en/cbn/publications/amendments-to-the-canada-us-tax-treaty

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Canada has its fair share of oppressive and ruthless rules too - I'd say even more so.

The only case where a US LLC by a Canadian might work is if the US firm does not have any income effectively connected with a US business operation - i.e. it's just a structure for foreign activities so you'd only be taxed in the home country. But except in this very limited case, I agree it's problematic from a double taxation point of view.

 

 

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