Why a Canadian should rarely own an LLC — what part of this actually needs a professional?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: the alternatives — a US corporation, a partnership, a branch, or a different entity entirely — all resolve the mismatch in different ways with different withholding outcomes.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Why is a US LLC a problem for a Canadian resident owner?
Because the two countries disagree about what it is. Canada generally treats a US limited liability company as a corporation, while the United States treats it as transparent and taxes the member on the profit directly. So the US tax is charged to you personally on income Canada says belongs to a company that has distributed nothing. The relief that is supposed to prevent double taxation depends on both systems agreeing on who earned what and when, and here they do not. The result is US tax paid with no Canadian tax of your own for it to be credited against.
Can I claim a foreign tax credit for the US tax on my LLC income?
Not reliably, and that is the whole difficulty. A credit works by setting tax paid in one country against tax on the same income, in the same hands, in the same year. Where the United States taxes you on profit as it arises and Canada taxes a corporation, or taxes you only later on a distribution, the two charges attach to different persons in different periods and the credit has nothing to sit against. Some narrow relief exists in particular circumstances, but it is much narrower than owners assume and has to be tested against your facts rather than taken for granted.
I already own an LLC — can I just dissolve it?
You can, but not casually. Unwinding an LLC is itself a taxable event in at least one of the two countries, and the order of steps and the year they fall in decide how expensive it is. A distribution out may be seen as a corporate distribution on the Canadian side while the US side sees nothing happening at all, and that asymmetry is easier to manage before the entity is closed than afterwards. Establish what the LLC holds, what each country will treat as disposed of, and in which year, and then dissolve on a chosen date.
Is a US corporation better than an LLC for a Canadian owner?
It removes the classification disagreement, which is the central defect, because both countries recognise a corporation as a corporation. What it introduces instead is a withholding and repatriation question every time profit comes north. That may be a much better trade, or it may not. A partnership, a branch of the Canadian company, or a different entity again each resolve the mismatch in their own way and with their own withholding outcomes, and which one wins depends on what the US activity is, who else owns part of it, and how you expect to exit. The comparison is worth doing properly before formation.
Does it change anything if the LLC only holds a rental property?
The classification disagreement does not depend on what the company does, so the basic mismatch is unchanged. Holding real property does add a second layer to plan around: the eventual disposition, and the withholding that attends a sale by a non-resident, which is applied without regard to how modest the gain turns out to be. That makes the exit, rather than the annual rental profit, the part most worth structuring in advance. Owners who set up an LLC for one property usually did so on liability advice alone, without anyone asking how the Canadian return would treat it.
Should I take advice before or after forming the LLC?
Before, and the gap between the two is larger than it looks. Forming an LLC takes an afternoon and almost no money. Unwinding one is a taxable event in at least one country, takes months, and is done under whatever facts have accumulated in the meantime. The analysis that matters — corporation, partnership, branch or something else, and what each does to withholding and to the credit for foreign tax — is the same analysis either way. Done first it is a choice; done afterwards it is a repair, and you pay for the repair as well as the choice.
What is a PFIC, and why do Canadian mutual funds cause trouble for US persons?
A passive foreign investment company is a non-US company that is mostly passive by income or by assets — which describes almost every Canadian mutual fund and ETF. For a US owner the default regime taxes distributions and gains punitively with an interest charge for the years the value built up. Two elections fix it, and both need annual information the fund may not produce for you. Holding the same exposure through US-domiciled funds usually avoids the problem entirely. See PFICs and Canadian mutual funds.
Are foreign trusts taxable in Canada?
They can be. Canada's deemed-resident-trust rules can pull a non-resident trust into the Canadian tax system where there is a resident contributor or, in some cases, a resident beneficiary — taxing it as though it were resident here. Separate reporting applies to transfers or loans to a non-resident trust and to distributions and debts from one. The planning point is that contributing to an offshore trust from Canada rarely achieves what the brochure suggests. See non-resident trusts.
