US/Cdn citizen operates his own business in Canada

[marge]

Hi, my son will be starting a business here (Canada) shortly. He was born in Canada and has always lived here, but also has US citizenship & passport because of a US parent. He has been filing US returns and the Treasury Dept. form every year. He has substantial ties to the US (family), and visits regularly, but has no plans to live there.

If he forms a corporation, as opposed to being self-employed, he has to file IRS form 5471, right? Would he also have to file it if he were self-employed? The IRS says it would take 83 hrs. to record-keep, learn and fill out just the basic form. without the schedules. That sounds like thousands of dollars in accounting fees, so avoiding it seems a good idea, if it's possible.

Are there any US tax advantages to being a registered company (QC) as opposed to being incorporated or a limited company?

As far as I can understand it, it would not help him tax-wise to form a holding company with his wife as owner (even if this were wise), because he would still be considered the owner. Is that true?

I have read that he would have to receive dividends from his holding company, on any amounts earned in the year, consequently paying Canadian taxes on them, or else owe US tax at the top rate, which is very high, 46% in 2006. But I can't seem to find anything about the rules for non-investment companies, which his actual business would be. Hi, my son will be starting a business here (Canada) shortly. He was born in Canada but also has US citizenship because of a US parent. He has been filing US returns and the Treasury Dept. form every year.

If he forms a corporation, as opposed to being self-employed, he has to file IRS form 5471, right? Would he also have to file it if he were self-employed?

Are there any US tax advantages to being a registered company (QC) as opposed to being an incorporated or a limited company?

As far as I can understand it, it would not help him tax-wise to form a holding company with his wife as owner (even if this were wise), because he would still be considered the owner. Is that true?

I have read that he would have to receive dividends from his holding company, on any amounts earned in the year, consequently paying Canadian taxes on them, or else owe US tax at the top rate, which is very high, 46% in 2006. But I can't seem to find anything about the rules for non-investment companies, which his actual business would be. Would his company pay US taxes on its profits at a higher rate than the Canadian rate?

Whatever way we slice it, it seems he's in for some very high accounting fees, and will disadvantage himself vis-à-vis Canadian taxes to boot. Do you have any advice for us?

Thank you for any help you can give.

[marge]

Part of my post has been repeated twice. I apologize!