Dual resident living in Canada operating a US business

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Dual resident living in Canada operating a US business

Post by erythrocyte » Wed Aug 08, 2018 12:11 pm


A dual resident wants to open a single owner service business in the US but wants tax minimization and liability protection. A sole proprietorship would give access the 20% QBI deduction and Foreign Tax Credits so double taxation is avoided.

On the other hand, what happens if he setup a US domiciled S-Corp for the US business? Keep in mind all business activities would be conducted solely in the US.

Here's a hypothetical scenario for the S-corp for one year -
Gross business income = $100,000
Wage paid to self = $50,000
Wage paid to (dual tax resident) spouse living in Canada (book-keeping, marketing, etc.) = $10,000 (married filing jointly in US, no other income)
Business expense = $5,000
Profits remaining in the US business = $35,000 (no dividends distributed)

This happens for 2-3 years, then he and spouse move permanently to the US and then profits are distributed as dividends at that point.

Please let me know your thoughts!

Thanks a lot.

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