Setting up a US LLC as a Canadian — can I handle this myself?
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 mismatch is the problem: where one country treats the entity as fiscally transparent and the other treats it as a corporation, the same income is taxed in different hands in each, and the foreign tax credit has nothing to attach to.
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.
Should a Canadian set up an LLC or a corporation in the US?
The question is not which entity is better in the abstract but which one the two tax systems describe the same way. A limited liability company is the entity US advisers reach for by default, and it is the one Canada is least comfortable with, because the two countries can treat the same company differently: transparent in one, a corporation in the other. That mismatch is the source of the difficulty. A regular corporation is usually characterised consistently on both sides, which makes the tax outcome predictable even when it is not the outcome a US adviser would pick first.
Why can I not claim credit for US tax paid through my LLC?
Because a foreign tax credit needs the same income, in the same hands, in the same period, in both countries. Where the United States looks through the company and taxes the owner personally, while Canada sees a corporation and taxes only what is distributed, the US tax is paid by one taxpayer on income that the other country has not yet attributed to them. There is nothing for the credit to attach to. The result is the same profit bearing tax twice with no relief mechanism, which is why this shows up as a problem in the year the first distribution is made.
I already own a US LLC — can the structure be fixed?
Sometimes, and it is worth establishing early what can still be changed and what has already happened. A classification election alters how the entity is characterised, but its usefulness depends on timing: elections work prospectively in the ordinary case, so income already earned and distributions already made sit under the old treatment. Options generally include electing a different classification going forward, interposing or converting to an entity both countries describe the same way, or leaving the company in place and managing the mismatch deliberately. Which of them is open depends on what has been filed and what has been paid out.
Does a classification election solve the problem for a Canadian owner?
It can, and it has to be made before the structure is used rather than after a problem is noticed. An election that makes the entity's characterisation consistent in both countries restores the alignment that a credit depends on, so the tax paid attaches to income the other country also recognises in the same hands. The limits are practical. The election has its own effective date rules, it can have consequences of its own when a classification changes, and it does not undo earlier years. Treating it as a step in setting up the structure, not as a repair, is what makes it useful.
Is a single member LLC a problem if I live in Canada?
A single member company is the version of this that surprises people, because it looks like the simplest possible structure. In the United States it is commonly disregarded, so the income is reported by the owner directly. Canada may still see a corporation. The owner is then taxed personally in one country on profits Canada regards as belonging to a separate company, and the two events do not meet. Simplicity of formation is not the same as simplicity of tax treatment, and here the simplest formation choice produces the harder result.
My US accountant recommended an LLC — why is my Canadian accountant unhappy?
Both are giving sound advice within their own system. From the US side the company is flexible, cheap to form and well understood by banks and clients. From the Canadian side it is an entity whose characterisation does not match, which puts the relief a Canadian resident relies on out of reach. Neither adviser is wrong about their own jurisdiction; what is missing is a decision made across both at once. The practical answer is to settle the entity choice before formation, with both sets of consequences written down side by side, rather than after the company has begun trading.
Is GILTI computed at the CFC level or the shareholder level?
Both, in sequence. Tested income, tested loss and the qualifying asset base are measured company by company. They are then aggregated at the US shareholder, which is where the netting of losses across companies happens and where the inclusion, the deduction and the credit are determined. That order matters in practice: a loss in one foreign subsidiary can reduce the inclusion caused by another, but only for a shareholder who owns both. See the GILTI inclusion and Form 8992.
What is Form 5471 and who has to file it?
The information return a US person files about a foreign corporation they own or control, in one of several filer categories that determine which schedules apply. It is not a tax computation, which is exactly why it gets missed — and why the penalty regime is severe. The consequence people underestimate is that a missing 5471 can keep the limitation period open on the whole return, not merely on the foreign company's figures. See Form 5471.
