What form of business entity is best for a US - Canada cross border business?

One of the most frequently asked questions by Canadians planning on starting a US business is what type of business entity should be formed for a cross border business. The answer is inevitably, “it depends”.

Each business will have its own specific factors to consider. The most common issues to consider are:

- the nature of business being formed, and the associated risks of the business activities

- the location of the business and whether there is a physical presence in the US

- which country (or countries) do the owners or investors reside or have legal status

- tax efficiency opportunities of the business structures options, and

- type of business visas required for Canadian persons needing to work in the US.

What are the different types of business structures in the US compared to Canada?

In the “for-profit” world in Canada there are generally 5 business structures to choose from:

- Corporations

- General Partnerships (GP)

- Limited Partnerships (LP) and

- Limited Liability Partnerships (LP)

- Sole proprietorships

In the US, the options for business structures are more plentiful - each with a different tax consequences, These options include:

- Corporations: this broad category includes the Benefit Corporation along with a sub-subcategory based on tax status of C- corporation and S-corporation.

- Limited Liability Companies (LLC)

- General Partnerships (GP)

- Limited Partnerships (LP)

- Limited Liability Limited Partnerships (LLLP)

- Limited Liability Partnerships (LLP)

-Sole Proprietorships

Generally speaking, the choice of entity for a Canadian resident expanding business into the US will balance three key factors: tax efficiency, business visa requirements and liability protection. Each business is unique, and the decision of entity type will depend on the importance of these factors from the perspective of the business owner.

Please visit our website at www.kickstartlaw.com and book a discovery call with a business lawyer for more information, or email us at hello@kickstartlaw.com.

** Disclaimer: This article contains only general legal information and is not intended to replace legal advice specific to the reader’s situation. We strongly encourage you to seek legal advice from your lawyer before acting based on any information given here.

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