I am meditative of combining the LLC or Corp with the Canadian collegue of mine, though the bit confused about taxation time. To have counts some-more complicated, this is an internet commercial operation scored equally to the bank comment in the US.
- How do I file taxes for a small business I started this year? (4)
- How much should my business bring in before I file taxes? (5)
- Transitioned business from proprietorship to LLC – How to file taxes? (2)
- Where would I go to find people who are willing to invest into my business or to invest in their business? (3)
- I would like to start a small business or franchise I could invest in or something i could make good money off? (5)
- if you invest on a business and doesn’t go well, can you get that money back on your taxes? (1)
- Can I invest my income from my business to avoid paying taxes? (4)
- Talents aside, what would be a fairly profitable business to invest 30-40k? (3)
- would you start your own business or invest in a joint stock company?why or why not? (1)
- if you had 200 000 dollars to invest into a business what would you invest into? (3)
- What would you do with $300,000 to make it grow? Start a business, invest it, school? (6)
- How does Voip Call termination Business works in south east asia, and how much would one need to invest? (1)
- Why would a business feel compelled to invest the money they are currently saving? (3)
- Why not reduce taxes on business taxes conducted in America but hyper tax overseas profit? (1)
- When my business begin bringing in big money, How much would i invest back into it and how much should i take? (1)
- What would be a good business to invest money that will produce more than 16% APR? (2)
- I would like to know if i invest 100,000 $ for business in Malaga – Spain how much earn in month approximate? (2)
- What would be a fair return on a small business investment? (1)
- How business proftis outside USA be remitted back to USA after paying local taxes, still taxable in USA? (1)
- What is the best way to promote an interior design business that would not cost a lot of money? (3)
Tagged as: Business, canadian, citizen, coowned, file, taxes, would
{ 3 comments… read them below or add one }
Well, if it is an LLC, then I believe that the tax liability of the owners is not really relevent, but it is where the LLC is registered. I know that there are certain exceptions such as an S type corp
Where is teh buisness incorporated or registered? This will answer the question.
You have lots of tax implications to consider. I have listed a few of them below and then offer a suggestion for your consideration.
1) If the LLC or Corp does business in both Canada and the US, you will need to file both Canadian (federal and provincial) and US (federal and state) income tax returns. If you pay salaries, you will also need to file Canadian and US payroll tax returns (and withhold and remit taxes).
2) The simple presence of computer equipment or software on a third-party’s computer could also require you to register, collect and remit the federal Goods & Services Tax (GST) and the provincial Sales Tax (PST or QST). On the positive side, GST paid is refundable.
3) If you use a US LLC or S-Corporation, then you must determine how much of the profit is related to the US activity and pay over to the US 35% of the US profit earned related to the Canadian citizen’s share of the LLC income, whether or not dividends are paid.
4) If you use a regular US Corporation, you will have both a corporate tax and the shareholder will have tax on corporate dividends received. You will need to file a corporate form 1120 and a form 5472 showing information about the Canadian citizen pwner.
5) Usually, the U.S.-Canada income tax treaty reduces the rate of tax on payments from one country to the other. However, Canada does not accept this to be the case with US LLCs, and so payments from Canada to the US LLC could be at withholding tax rates as high as 30%.
6) I can go on and on with the complexities of your situation, but let me offer a suggestion:
To simplify matters, you may want to consider a single-owner U.S. LLC with an independent contractor compensation agreement with the Canadian citizen based on profits that the LLC earns. This way, payments by the LLC to the Canadian citizen are not subject to U.S. withholding and helps you avoid establishing a taxable Canadian presence requiring you to file Canadian tax returns of all types. A single owner LLC is a “disregarded entity” meaning that you do not need to file U.S. income tax returns for the LLC. Instead, you include the income on Schedule C filed with your Form 1040.
Good luck on your venture!