Ever since the US administration’s recent announcement of tariffs on Canadian goods, we have seen an uptick in Canadians looking to expand into the US to avoid the tariffs. This video is intended to guide you on what you consider when planning such a move.
Involve your tax advisors
First, involve your tax advisors early on to ensure your business’s cross-border setup is tax efficient and to ensure the tax-efficient repatriation of money.
Consult immigration advisors
Second, if you want to move to the US or otherwise secure a work permit, involve immigration advisors early on because their advice may influence the business’s ultimate structure, and also keep your expectations in line. You cannot just go and work in the US without work authorization.
Choose the right U.S. business organization
Third, once you have the advice of your tax and immigration advisors, we would then discuss various US business organizations that may be used to structure your cross-border business. If you do a quick Google search, you will likely come across the term “LLC” or “limited liability company”. LLCs are typically not used by Canadians when expanding to the US for various reasons. Rather, we typically see Canadians using a US C-Corp. or a combination of a US C-Corp. and Limited Partnership.
As a side note, you may have heard or read about “S-Corps” and “C-Corps.” Both are corporations; the difference lies in how they are taxed and organized. If you are wondering which to use, to put it plainly, as a Canadian, you will likely use a C-Corp. Because, generally speaking, only US residents may be shareholders of an S-Corp.
Americanize your contracts
Fourth, once your business entity is set up, you will have to consider Americanizing your Canadian contracts because there are differences in applicable law. For example, if you sell goods in Ontario, consider the differences between Ontario’s Sale of Goods Act and Article 2 of the applicable state’s Uniform Commercial Code. If you are a software provider, consider differences in IP law, excluding the Uniform Computer Information Transactions Act in force in Virginia or Maryland, consider the differences in privacy law (for example, to date, more than a dozen states have comprehensive consumer privacy laws in force), et cetera.
Hiring employees
Fifth, consider whether you will be hiring employees; if so, seek legal representation to ensure your employment contracts are properly tailored for the state you intend to operate in. Consider registering your business with the appropriate regulators and deducting the applicable payroll tax. Otherwise, consider using a Professional Employer Organization or a Payroll service provider.
Intellectual property
Lastly, consider your intellectual property and whether it needs to be registered in the US.
Have questions about expanding into the United States? We can help.
The points I have provided you are not exhaustive. Instead, they are important considerations for you to consider before spending money expanding into the US.
If you have any questions about this Article’s content, you may contact Siskinds Canada-U.S. Cross-Border Lawyers. You can also contact me, Savvas Daginis, at savvas.daginis@siskinds.com if you have any questions.