Tax Treatment of Single member US LLC in Canada

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.

Moderator: Mark T Serbinski CA CPA

Post Reply
8xroad
Posts: 4
Joined: Fri Oct 25, 2019 8:53 pm

Tax Treatment of Single member US LLC in Canada

Post by 8xroad »

Cross Border Gurus,
I am a dual resident in the US (due to green card) and in Canada (due to ties). Starting Feb-21, I am working in the US as a single member US LLC. The LLC has no income or operation in Canada. I am considering to use the LLC as a pass through disregarded entity and pay all US taxes in my individual 1040. I have a few questions in my effort to minimize the total tax liability and hoping you could help.

1- Is the LLC required to file taxes in Canada, even if it does not have any income or operation in Canada?
2- If it is required, will CRA treat it as a corporation and double tax on the total income? There appears to be some exception where it is possible to indirectly access Treaty benefits if its members satisfy the look-through and limitation on benefits rule. I am not very clear on how this works and if would apply in my situation.
3- Is there a better way to structure the LLC to prevent double taxation, if it comes to that.
4- In my individual T1 tax return for Canada, is the total income of the LLC taxable or does CRA tax only the withdrawals from the LLC?

Appreciate if you could please provide some guidance on what is the best strategy to adopt.
I apologize if this has already been discussed earlier but my search did not find much on this topic.
Post Reply