USA Setup Corporation in US or Canada?

[Jamie Ryan]

Hi. I am hoping someone can help.

I am want to form a corporation with two people who are residing and citizens of Canada since we are going to work on a project, or series of projects, together. We need the legal protection of a corporation. They are Canadian and I am a US citizen living in the US.

Is it best to form a corporation in the US or Canada? Please explain the reason behind your advice. I am concerned about tax implications, currency exchange rates and other cross country legalities. I have created corporations in the US before so I am somewhat familiar with that process. It is the cross between the two countries that confuses me.

I would greatly appreciate any advice. I do not know what is best which is why I reaching out to experts like you.

 

[kirby]

As you have already opened US corporations you already know the road ahead if you choose a US corp, not so for Canadian corp. Consider that if you incorporate in Quebec, your official documents must be in French. But hey Canada has a 26.5% corporate tax rate.

 

[Jamie Ryan]

As you have already opened US corporations you already know the road ahead if you choose a US corp, not so for Canadian corp. Consider that if you incorporate in Quebec, your official documents must be in French. But hey Canada has a 26.5% corporate tax rate.

Thank you.

Yes, if the corporation is formed in Canada it will be based in Quebec because that is where the partners live. My to be partners alerted me that the name also has to be in French. This is quite a different scenario for me and a real learning experience. Interesting stuff.

 

[Jamie Ryan]

If the business is incorporated (Inc.) in the US with s-corp designation does that mean revenue I or the business earns will be taxed at the current US corporate tax rate of 40%?

 

[Bad Medicine]

If you are a U.S. citizen and you are considering starting a company outside of the United States you might want to learn everything you can about FBAR and FATCA. In the past few years the U.S. government has become hyper-vigilant about catching tax cheats whom they believe take advantage of overseas corporations and trusts to hide income, and these new FBAR and other rules are so draconian that they have driven up expats filing to renounce their U.S. citizenship to record levels in the past few years. People are losing the mortgages on their homes overseas, finding they can't open bank accounts, etc, all because many overseas banks are dropping their U.S. customers instead of complying with the rules that the U.S. is trying to force on them. Some people are even losing their jobs in overseas companies because a U.S. citizen who has signature authority on an overseas bank account falls under these rules, and foreign companies who have accountants who are U.S. citizens would rather just fire the accountant than have to comply with the rules. My understanding is that anyone with a 10% stake in a foreign corporation gets sucked into all of this too - and the penalties are harsh, failing to file a form can result in losing large percentages of the money in your accounts, etc.

 

[Jamie Ryan]

If you are a U.S. citizen and you are considering starting a company outside of the United States you might want to learn everything you can about FBAR and FATCA. In the past few years the U.S. government has become hyper-vigilant about catching tax cheats whom they believe take advantage of overseas corporations and trusts to hide income, and these new FBAR and other rules are so draconian that they have driven up expats filing to renounce their U.S. citizenship to record levels in the past few years. People are losing the mortgages on their homes overseas, finding they can't open bank accounts, etc, all because many overseas banks are dropping their U.S. customers instead of complying with the rules that the U.S. is trying to force on them. Some people are even losing their jobs in overseas companies because a U.S. citizen who has signature authority on an overseas bank account falls under these rules, and foreign companies who have accountants who are U.S. citizens would rather just fire the accountant than have to comply with the rules. My understanding is that anyone with a 10% stake in a foreign corporation gets sucked into all of this too - and the penalties are harsh, failing to file a form can result in losing large percentages of the money in your accounts, etc.

Great info and points. I will certainly take your advice. Thank you!