The United States is Canada’s largest trading partner and thus a very appetizing market for Canadian businesses. Many Canadian companies and individuals looking to invest in or emigrate to the US often contemplate whether it would be worthwhile for them to establish a corporation there. Grinhaus Law Firm frequently receives inquiries about the pros and cons of incorporating in the US; below are some important considerations when contemplating incorporation in the US.
Why should I incorporate in the US?
There are several reasons why Canadians are drawn to incorporating in the US including, but not limited to:
- For immigration purposes
- To facilitate further business with US companies. As one client put it: “The second they see the Canadian address, they start questioning and negotiating on all kinds of things.”
- For tendering: when negotiating contracts, larger retailers often want to see a US business number
- For applications: some jurisdictions require an American address in order to apply for government programs or projects.
In which state should I incorporate?
Each state has its own rules and regulations. Generally, there are a few factors you want to look at before incorporating:
- Ownership, management, and permanent establishment: Many states have residency requirements for the ownership and management. This can be an issue for Canadians who do not reside in the US.
- Tax implications: Different states have different types of tax and different rates of tax. Depending on your motive and type of business, you will want to choose the state in which you and your business will be exposed to the least amount of tax.
- State annual filings: Almost every state has an annual filing requirement for every corporation. These can be complex to do and the penalties for failure to file or for late filings can add up to thousands. Having an experienced professional managing your US corporation will help mitigate this liability at a fraction of the expense.
- Where you want to conduct business: Although it may appear to be easier to conduct business in the state in which you become incorporated, there are other structuring options to consider which may be more tax and liability efficient.
How do I get started?
Navigating the process can be complicated. The team at Grinhaus Law Firm has worked with many Canadian clients in determining the best way to mitigate your Canadian tax and business liabilities by advising on:
- the best state in which to incorporate;
- organizing your US subsidiary/entity;
- connecting you with US resources for administering your business;
- applying for the requisite business and employee identification numbers;
- applying for work permits for your employees; and
- filing the mandatory annual corporate maintenance.
Call or email Grinhaus Law Firm to find out how we can guide you through the process of incorporating in the US the right way. As a boutique law firm located in midtown Toronto, we have the experience and expertise necessary to help you establish your presence in the US.
PLEASE NOTE: THIS IS NOT INTENDED TO BE LEGAL ADVICE AND SHOULD NOT BE RELIED ON AS SUCH. IT IS IMPORTANT THAT YOU CONSULT WITH A LICENSED PROFESSIONAL.