Owning/managing Canadian real estate through US LLC?

3 Replies

I'm a US citizen and Canadian permanent resident who recently emigrated to Canada, and I am planning to buy rental real estate in Ottawa. I am hoping for duplex or large single family house where I would live in one room or basement and rent out the rest. I am concerned about liability protection and have been thinking about owning and operating the rental through a Canadian corporation. I'll make another post detailing my thoughts after I research some more, but if I go that route, for US tax purposes, I would own a CFC whose income would probably be considered Subpart F, in which case I would want to pay myself dividends each year in order to trigger tax on the Canadian side that I could use as a foreign tax credit on my US tax return. Unfortunately it seems impossible to completely eliminate double taxation on the Canadian or US side, especially when the property is sold, and I was thinking how convenient US LLCs are. Canada does not recognize an LLC as a business entity and I believe just treats foreign LLCs as foreign corporations.

So, I was wondering if it would be a good idea to form a US LLC of which I would be sole owner, say in Delaware, register it as a foreign LLC in Ontario as described in the links below, and own and operate my rental real estate in Ottawa through this LLC? Would it provide the same liability protection that a corporation would in Canada? Would it encounter issues operating in Canada? Would it be considered a foreign buyer from the real estate perspective since it is a US LLC?

http://www.centrolegalworks.com/limited-liability-...

https://businessregistration.ca/business-name-regi...

https://www.ontariobusinesscentral.ca/blog/llc-in-...

Kate:

The CRA does not recognize LLCs as a flow through entity and will treat them as a corporation.  

Additionally, holding Canadian real estate under a foreign corporation will create a less favourable {Canadian} tax treatment when you divest.

Thanks, Roy. I know foreign LLCs are taxed as corporations in Canada, but my question is are they also treated as corporations in the legal sense in that they would provide the same liability protection that I would get from forming a Canadian corporation?

IMHO: The 'added' liability protection of incorporating here in Canada is over-rated.    Despite three generations of consuming U.S.A. television drama, we remain substantially less litigious here in Canada ... you generally have to do something rather egregious to get sued.

Officers/directors of a company remain responsible for the conduct of the company - as the primary or single owner of an investment holding company you would also be an officer of the company.  If the company is deemed to have committed negligent, or worse, actions, the directors/officers can be held accountable.

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