Q and A: Setting Up Business in the U.S.

The U.S. has a number of different business structures available when conducting your affairs in the U.S., whether your business is rental property or operating a viable small business.

Canada treats many of these structures differently than the U.S. and if you are not careful, the end result can be double taxation.

Case Study

Jenna owns her own restaurant in Penticton, British Columbia, and is thinking about branching into the United States. She is planning to open up a new restaurant in Seattle, Washington, before the end of the year and is looking to transfer one of her top chefs down to that location to work and oversee the operations; she plans to visit the restaurant frequently to check the progress and make sure it is operating to her standards.

Questions and Answers

Does Jenna need to get a visa for the chef?

Yes, because he or she is going to be employed in the U.S.

What are Jenna’s options for setting up her restaurant in the U.S.?

She can set up a separate U.S. corporation, she could set up a branch of her Canadian corporation, or she could use a U.S. LLC.

How will this new restaurant be taxed?

It depends on how the U.S. operations are set up, but the profits will be subject to regular income tax in the U.S. because it operates there (i.e., as a permanent establishment); however, it could also be subject to other taxes.

Many Canadians consider doing business in the United States, whether it is as an individual employee, sole proprietor or as a corporation. Depending on the context of how one plans to conduct business in the U.S., there are different procedure and rules that apply in each scenario and it is always good practice to know what is required before jumping into an endeavor such as this.

To learn more about doing business in the U.S., pick up a copy of Canadians & The IRS, by Angela Preteau – available in the Knowledge Bureau bookstore.

Excerpted from Canadians & The IRS. © Knowledge Bureau, Inc. All rights reserved.