US LLC VS UK LTD (CANADIAN RESIDENT)

[GearedUp]

Hello all!

I am planning to start my online business and I will be receiving payments from clients in the Americas, to begin with.
If it works out well - I will try to extend to the other markets.

I am stuck with one thing here: as a Canadian resident, I can't find particular information on what is better in terms of taxes in my case - creating a US LLC (Wyoming, Delaware) or going with UK LTD company (as I saw an article which stated that there is a chance of double taxation with LLC company).

Can anyone help me understand this better?

Thank you!

 

[kurosaki4d]

I am in the same position, I'd love to know the answer to this question!

 

[Sols]

Why not just form a Canadian company?

US LLC or UK LTD will both be considered as tax resident, taxable entities under Canadian law. Exception only through lack of enforcement of tax law.

There is zero tax advantage for either setup, unless you also plan to set up an office with employees in US or UK

 

[GearedUp]

Why not just form a Canadian company?

US LLC or UK LTD will both be considered as tax resident, taxable entities under Canadian law. Exception only through lack of enforcement of tax law.

There is zero tax advantage for either setup, unless you also plan to set up an office with employees in US or UK

Then Canadian LP I assume? Are there any companies who assist with the organization and business banking?

 

[RachelNg]

At the start-up level, you are most interested in keeping costs down, including taxes. Forming an LLC can be done for very little upfront costs online and if structured correctly can insulate your personal assets from business liabilities.

It is my understanding that an LLC can elect to be treated as a Partnership for tax purposes, which allows the LLC’s losses and gains to be passed through and are reported on the LLC member’s own returns. No double tax.

But, as the business grows raising capital isn’t always easy with an LLC and corporate structure provides more liability protection. If the business is going to move international the laws governing LLC (non-corporate entities) are all over the landscape while corporate laws are more consistent.

Practically speaking you can’t run a multi-markets or international as an LLC; just too ungainly.

 

[Sols]

Then Canadian LP I assume? Are there any companies who assist with the organization and business banking?

Look for someone local to help you with that; a tax adviser, accountant, attorney. Maybe a local office of an international or at least pan-Canadian firm in case you want something with a broader reach.

It is my understanding that an LLC can elect to be treated as a Partnership for tax purposes, which allows the LLC’s losses and gains to be passed through and are reported on the LLC member’s own returns. No double tax.

Regardless of how it's elected to be treated in the US, Canada does not treat LLCs as Partnerships. It becomes taxable like a corporation under Canadian law.

 

[GearedUp]

Wow, that's some solid piece of information here! Thank you, everyone!

If I may quote this part:

Practically speaking you can’t run a multi-markets or international as an LLC; just too ungainly.

Do you mean that I should be looking for any other alternative to LLC, or you mean that for multi markets ill have to open separate entities? (LTD in the UK for Europe, LLP in Canada for the local market, etc.)?

 

[joffreylol]

My advice is if you live in Canada, use a Canadian Sole proprietorship, Partnership, Corporation, whatever works for your situation. You have to talk to Canadian accountant/lawyer on which one to choose. You gain NOTHING with using US LLC or UK LTD. It doesn't matter where the company is registered but where it is run from (Canada in your case). So both US LLC and UK LTD would be treated as if they were a Canadian corporation. Zero tax optimization and most likely double taxation problems (and more headaches). If you need to accept money in different currencies you can use an EMI like Wise. For example you have a Canadian LP and open a business bank account at Wise you get US account number and routing number for receiving USD as if you had a real bank account in the US. You also get a GBP account for receiving Faster Payments System (FPS), Bacs or CHAPS as if you had a bank a real bank account in the UK. For CAD you would be able to receive wire, Interac and OBTs as if you had a real bank account in Canada.