Can a Canadian Business Owner Set Up an LLC in The USA
Yes, but since LLCs do not exist in Canada, the Canada Revenue Agency (CRA) treats American LLCs as corporations, which can lead to unexpected taxation issues. For example, the CRA allows a foreign tax credit for U.S. taxes paid by a U.S. LLC of 15% of the earnings. This means that any amount of U.S. taxes paid above 15% cannot be used to reduce Canadian taxes, which might result in double taxation on part of the U.S. LLC income. For this and other reasons, it is generally recommended that Canadian companies that wish to set up U.S. subsidiaries do so by creating a regular U.S. corporation (C-Corp). U.S. taxes paid on earnings from a U.S. corporate subsidiary can be fully credited against Canadian taxes. As always, consult an accountant knowledgeable in cross-border taxation prior to expanding one's business into the U.S. (or any other country).
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