S-corp via LLC or C-corp
Moderator: Mark T Serbinski CA CPA
S-corp via LLC or C-corp
I am dual U.S. and Canadian citizen, currently living in U.S. I will likely be moving to Canada sometime in 2021. I am in the process of setting up an online business and trying to set it up in a way that will make the most sense once I have to also start paying Canadian taxes. My understanding is that my best option is to set up an S-corp. I have spoken with a cross-border CPA who advised me to set it up as an LLC and then designate it as S-corp for tax purposes. From what I have read, the other way to get to an S-corp is via C-corp. I know that an LLC is not a good idea as a Canadian resident, so just want to make sure that going the LLC route to get to an S-corp will be effective. Any insight would be greatly appreciated. Thank you!
Re: S-corp via LLC or C-corp
I'm also interested in this! Same situation, but already have the LLC and already have moved back to Canada.
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- Posts: 1
- Joined: Thu Dec 03, 2020 7:42 pm
Re: S-corp via LLC or C-corp
I am dual citizen who returned to Canada for COVID 2020 with Nevada based LLC designated as an Scorp for tax purposes.
I am getting conflicting advice on pass through taxation. Specifically,
https://www.canada.ca/en/department-fin ... -2007.html
Article 2 – Par. 2 of the 5th Protocol of the US-Canada Income Tax Treaty(The 5th Protocol was signed effective late 2007 (early 2008)):
Article IV (Residence) of the Convention shall be amended by adding the following after paragraph 5:
6. An amount of income, profit or gain shall be considered to be derived by a person who is a resident of a Contracting State where:
(a) The person is considered under the taxation law of that State to have derived the amount through an entity (other than an entity that is a resident of the other Contracting State); and
(b) By reason of the entity being treated as fiscally transparent under the laws of the first-mentioned State, the treatment of the amount under the taxation law of that State is the same as its treatment would be if that amount had been derived directly by that person.
This seems to indicate that dual citizens will get the same expected taxation as they do in the US.
I am getting conflicting advice on pass through taxation. Specifically,
https://www.canada.ca/en/department-fin ... -2007.html
Article 2 – Par. 2 of the 5th Protocol of the US-Canada Income Tax Treaty(The 5th Protocol was signed effective late 2007 (early 2008)):
Article IV (Residence) of the Convention shall be amended by adding the following after paragraph 5:
6. An amount of income, profit or gain shall be considered to be derived by a person who is a resident of a Contracting State where:
(a) The person is considered under the taxation law of that State to have derived the amount through an entity (other than an entity that is a resident of the other Contracting State); and
(b) By reason of the entity being treated as fiscally transparent under the laws of the first-mentioned State, the treatment of the amount under the taxation law of that State is the same as its treatment would be if that amount had been derived directly by that person.
This seems to indicate that dual citizens will get the same expected taxation as they do in the US.
Re: S-corp via LLC or C-corp
I don't interpret that text that way.
Where are you getting "citizen" from? It talks about "resident", which means you have to still be living in that state. Since you're living in Canada now, you're no longer a resident of that state.
Or am I missing something?
dualcitizenscorp wrote:
> I am dual citizen who returned to Canada for COVID 2020 with Nevada based
> LLC designated as an Scorp for tax purposes.
>
> I am getting conflicting advice on pass through taxation. Specifically,
>
> https://www.canada.ca/en/department-fin ... -2007.html
> Article 2 – Par. 2 of the 5th Protocol of the US-Canada Income Tax
> Treaty(The 5th Protocol was signed effective late 2007 (early 2008)):
> Article IV (Residence) of the Convention shall be amended by adding the
> following after paragraph 5:
> 6. An amount of income, profit or gain shall be considered to be derived by
> a person who is a resident of a Contracting State where:
> (a) The person is considered under the taxation law of that State to have
> derived the amount through an entity (other than an entity that is a
> resident of the other Contracting State); and
> (b) By reason of the entity being treated as fiscally transparent under the
> laws of the first-mentioned State, the treatment of the amount under the
> taxation law of that State is the same as its treatment would be if that
> amount had been derived directly by that person.
>
> This seems to indicate that dual citizens will get the same expected
> taxation as they do in the US.
Where are you getting "citizen" from? It talks about "resident", which means you have to still be living in that state. Since you're living in Canada now, you're no longer a resident of that state.
Or am I missing something?
dualcitizenscorp wrote:
> I am dual citizen who returned to Canada for COVID 2020 with Nevada based
> LLC designated as an Scorp for tax purposes.
>
> I am getting conflicting advice on pass through taxation. Specifically,
>
> https://www.canada.ca/en/department-fin ... -2007.html
> Article 2 – Par. 2 of the 5th Protocol of the US-Canada Income Tax
> Treaty(The 5th Protocol was signed effective late 2007 (early 2008)):
> Article IV (Residence) of the Convention shall be amended by adding the
> following after paragraph 5:
> 6. An amount of income, profit or gain shall be considered to be derived by
> a person who is a resident of a Contracting State where:
> (a) The person is considered under the taxation law of that State to have
> derived the amount through an entity (other than an entity that is a
> resident of the other Contracting State); and
> (b) By reason of the entity being treated as fiscally transparent under the
> laws of the first-mentioned State, the treatment of the amount under the
> taxation law of that State is the same as its treatment would be if that
> amount had been derived directly by that person.
>
> This seems to indicate that dual citizens will get the same expected
> taxation as they do in the US.