CAD Citizen - Part owner of US LLC

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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loonietom
Posts: 7
Joined: Tue Apr 02, 2013 2:06 pm

CAD Citizen - Part owner of US LLC

Post by loonietom »

I receive a K-1 from a US LLC and record that as dividend income on my CAD return. Unfortunately, my US withhold tax is recorded as both div tax credit and then as a deduction above 15% - not ideal when $ gets bigger.

Question - is there a way to receive K-1 income that is not considered 'dividend' income in Canada? Can I have a guaranteed payment instead?

Could I have a holdco or professional corp in TO hold the LLC shares and pay me? Sounds expensive to maintain.
JGCA
Posts: 754
Joined: Thu Nov 18, 2010 3:05 pm
Location: Montreal, QC Canada

Post by JGCA »

If you receive a K1 saying you have dividends thais is becauser the partnership received dividends and distributed them to you as such. The witolding tax is 15% so you then report it in Canada and claim the tax credit on this income. Why do they then take off more tax than 15% since this is the amount you only are liable to pay on dividends?

If they want to give it to you as guaranteed payment then it becomes an expense to teh partnership and you get it as a salary the withold tax now increases to 30% business income and the tax goes up so you need to see if this is more beneficial , remember as a dividend you are paying tax in Canada as if it were interest income no dividend tax credit so it would not make a difference in Canada at all but the withiolding tax would change and they will benefit from deducting it as an expense where you get no benefit at all, not a good idea.

Can you put the LLC units in a corp in TO, same thing there is still with tax and you still need to get the money out and to tax credit for teh FTC it has to be timed in the same year too complex for no benefit at all it still has to come to you anyhow to get the FTC.
JG
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