When expanding to the US, it is important to employ a team-based approach in your planning process before taking action. Include your U.S. immigration attorney, U.S. business attorney, cross-border tax counsel, and cross-border logistics professionals in your planning conversations, and make sure they are all communicating with each other so you can put your best for forward.
The following common cross-border business entity structures are presented and reprinted here with the permission of our trusted cross-border business law colleagues at Barkley Law Group P.S. These descriptions are general overviews for informational purposes only. Make sure to consult with a U.S. business attorney about your specific matter.
Preferred Cross Border Structures and Entities
The C Corporation: The C Corporation is the most common entity of choice for the Canadian and International parent businesses creating a subsidiary in the United States. Typically, the Canadian and International parent business becomes the sole shareholder of the subsidiary US Corporation. The C Corporation is the “go to” entity selection by business lawyers to support a business immigration Visa.
The General Partnership: A partnership is an association of two or more persons to carry on a business as co-owners for profit. The use of a General Partnership is utilized for passive real estate ventures of two or more persons or entities. Canadian and International businesses seldom use the general partnership entity as a business operating entity. The General Partnership entity is sometimes used in passive real estate investments. The General Partner’s personal assets and their partnership assets are exposed to claims by their creditors, creditors of the partnership and potentially claims against the partner. A General Partnership has Limited Partners whose liabilities may be limited.
The Following Structures and Entities Will Most Likely Not Meet Cross Border Business and Tax Purposes:
Sole Proprietorship: A sole proprietorship is the simplest form of doing business. No separate legal entity is created. An individual or a marital community simply devotes a portion of its assets to the conduct of a business. Business owners typically operate under a d/b/a for their business purposes. The sole proprietorship provides little if any assistance to your immigration lawyer, no liability protection and virtually no presence or identity in the United States. The sole proprietor is personally liable for all obligations of his/her business.
Limited Liability Company (LLC): The Limited Liability Company (LLC) is not usually an optimal option for Canadians. The limited liability company (or “LLC”) is treated like a corporation for state law purposes, thereby limiting the liability of its owners, but is taxed like a partnership. It is not subject to the S corporation requirements, but has full pass-through tax benefits. In the United States a Limited Liability Company is not a corporation. It is a separate business entity in and of itself. Do not confuse the “concept” of limited liability, which all Canadian companies and corporations have with separate and distinct legal entity referred to as a Limited Liability Company. For the most part, tax advisers and lawyers will recommend against placing an international citizen in an LLC, or will only recommend it in special circumstances.
S Corporation: The S Corporation must have as shareholders only U.S. permanent residents, U.S. citizens, or certain qualifying trusts or estates. As such, it is rarely used in a cross-border business structure.