Canadian setting up an LLC in the US

4 Replies

Hi folks,

We're Canadians living in Toronto and are planning to do some RE investing in the US (the local market in Toronto is absolutely nuts). We're just starting out and doing our homework into US opportunities. It looks like we need to create a US-based LLC to conduct our transactions and do business.

We would be grateful for some advice about how do this properly:

1. We have a home in Florida so we were thinking of setting up the LLC in that state. Does it matter which state we set up the LLC in? Can we do business in all states?

2. Of course we want to minimize administration costs, but we understand that these are needed. What are the filing requirements once we've set up the LLC?

3. Can we retain a professional that would handle all of this? An accountant? Do we need a lawyer?

4. I expect the answer to Question 3 is "Yes", so I will ask if anyone can refer a good, inexpensive accountant that we could talk to help us with the LLC and all future transactions.

Thanks very much. Your advice is very much appreciated.

Andrew

From my own research and consultations with lawyers, accountants and cross-border specialist the LLC entity is not the recommended choice for a Canadian citizen. It mainly has to do with how Canada Revenue Agency views the LLC, it has to do with the flow-through tax structure of an LLC, read link. It's confusing because when you talk to lawyers or accountants down in the US they immediately recommend an LLC like a reflex but many of them do not know of the CRA tax issue with LLC, you can avoid the double tax issue by choosing to have the LLC taxed as a corporation but you might as well just create a US Corporation from the beginning. If you want to still have a "pass-through" US entity structure your only real options are to create a US general partnership or US limited partnership as the CRA recognizes these under the CAN-US tax treaty.

I am not lawyer or accountant and the above information and opinions expressed is soley based on my own independent research. You can find a lot of articles on this subject just by googling "LLC Canada Taxes" and again ensure you get proper consultation as your goals and needs will vary and dictate the type of structure you will end up using.

Hello @Bayard P. , thanks very much for the response - I'm glad I asked!

Andrew

@Bayard P.

An LLC may work as an incorporated entity for a Canadian (natural person or corporation) holding property in the U.S.A. depending on your situation as you need not elect to treat it as a flow-though entity. In fact, one of the driving reasons to incorporate an entity in another country is to gain control of how and when you repatriate retained earnings and capital gains.

There are other reasons one may choose an LLC over a C-corp .... administrative costs being one.

     

@Andrew K.

You are best to consult with an/your accountant and attorney with cross border experience about your particular situation.  

Hey Andrew,

What came of this? I've been researching the same thing and I'm curious what happened.

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