Starting a U.S. Business as a Canadian Citizen

LLC Formation, L-1 Visas & Tax Implications

Expanding into the U.S. market offers Canadian entrepreneurs access to new customers, increased profits, and growth potential. But before you start selling or serving U.S. clients, it’s essential to understand the legal, immigration, and tax consequences of doing business south of the border.

In this guide, we break down how a Canadian citizen can start a U.S. single-member LLC, what the L-1 visa means for business mobility, and the critical tax residency implications on both sides of the border.

1. Starting a U.S. Single Member LLC as a Canadian Citizen

Yes, Canadian citizens can legally form and fully own a U.S.-based LLC, even without holding a green card or permanent residency. In fact, a single-member LLC is one of the simplest structures to use.

What is a Single-Member LLC?

A Limited Liability Company (LLC) provides:

• Personal liability protection (your personal assets are shielded from business debts)
• Pass-through taxation, meaning the profits “pass through” to the owner’s personal tax return
• Simpler formation and fewer ongoing requirements than a corporation

When there’s only one owner, it’s considered a single-member LLC (SMLLC). For tax purposes:

• In the U.S., a foreign-owned SMLLC is considered a disregarded entity, meaning it doesn’t file its own tax return (unless it elects corporate treatment).
• However, it is required to file IRS Form 5472 and a pro forma 1120 to disclose its ownership and report transactions between the LLC and its foreign owner.

State Registration

The LLC can be formed in any state, but popular choices include:

• Delaware (business-friendly courts)
• Wyoming (low fees, privacy)
• Florida or Texas (no state income tax)

You will also need:

• A U.S. mailing address and Registered Agent
• A Federal Employer Identification Number (EIN) – apply through the IRS
• A U.S. business bank account, often requiring an in-person visit

2. L-1 Visa: Moving from Ownership to Physical Presence

If your Canadian company is operational and you plan to expand into the U.S. and run the business yourself, the L-1 visa is a powerful option.

What is the L-1 Visa?

The L-1A visa allows a Canadian business owner or executive to transfer to a newly formed or existing U.S. subsidiary or branch. It’s ideal for Canadian citizens setting up an LLC to serve as a U.S. branch of a Canadian parent company.

Requirements include:

• The Canadian company must be active and operational.
• You must have worked there for at least one year in the last three years.
• The U.S. company must be a subsidiary, branch, or affiliate.

As a Canadian citizen, you can apply directly at the border or a port of entry—no need to wait for USCIS petition approval, which streamlines the process.

Benefits of the L-1 Visa

• Live and work legally in the U.S.
• Manage your U.S. operations directly
• Pathway to permanent residency (green card)
• Allows spouse to apply for work authorization

3. Tax Implications for Canadian Citizens Owning a U.S. Single-Member LLC

Here’s where things get complicated—and where tax planning becomes critical.

U.S. Tax Obligations

As a foreign owner of a U.S. LLC, you may be required to:

• File Form 5472 and pro forma 1120 annually with the IRS
• Report and pay U.S. income tax on income that is effectively connected with U.S. trade or business (ECI)
• File a U.S. tax return (Form 1040NR) if income is U.S.-sourced

Note: A U.S. LLC doesn’t automatically shield a Canadian from U.S. taxes. If you’re doing business in the U.S., the IRS may consider you to be “engaged in a U.S. trade or business,” which triggers U.S. tax obligations.

Canadian Tax Obligations

If you remain a Canadian tax resident, you are taxed on your worldwide income by the Canada Revenue Agency (CRA), including any profits from your U.S. LLC.

Canada may allow a foreign tax credit for U.S. taxes paid to avoid double taxation, but this must be carefully structured.

You are considered a Canadian tax resident if:

• Your primary home is in Canada
• Your spouse or dependents live in Canada
• You maintain significant residential ties (e.g., bank accounts, driver’s license, health coverage)

Even if you spend part of the year in the U.S., you can still be a Canadian resident for tax purposes—unless you meet the IRS “substantial presence test.”

4. What If You Spend Significant Time in the U.S.?

If you stay in the U.S. for 183 days or more in a calendar year, or a weighted average over three years, you may become a U.S. tax resident under the substantial presence test.

As a U.S. tax resident, you would be taxed on your worldwide income by the IRS.

Tax Residency Tie-Breaker Rule

The U.S.-Canada Tax Treaty has a “tie-breaker” rule for dual residents. If both countries claim you as a resident, you’ll use the treaty to determine where you’re primarily resident based on:

1. Where your permanent home is
2. Where your center of vital interests lies (family, business, etc.)
3. Where you habitually reside
4. Citizenship

Using this rule, many Canadians can avoid dual taxation—but only if it’s properly disclosed and documented.

5. U.S. and Canadian Tax Filing Requirements (At a Glance)

6. Recommendations Before You Start

Setting up a business across the border is a strategic move, but success depends on:

• Proper business structuring
• Accurate tax filings in both countries
• Visa and immigration planning
• Banking and financial compliance

It’s best to work with professionals who understand both U.S. and Canadian tax laws, especially when dealing with LLCs owned by non-residents or setting up a company with the intent of applying for an L-1 visa.

Conclusion: Expand with Confidence, Plan with Precision

As a Canadian entrepreneur, owning and running a U.S. single-member LLC is a great way to grow your business. But doing so without a solid understanding of tax residency rules, IRS reporting requirements, and potential L-1 visa strategies can lead to costly mistakes.

At EAS Income Tax Services, we specialize in helping individuals and businesses navigate complex IRS situations, tax filings, and cross-border tax issues. Whether you’re setting up your first U.S. company or trying to figure out your tax obligations as a Canadian resident working in the U.S., we can help simplify the process.

Why Choose EAS Income Tax Services?

Navigating self-employment taxes and financial planning can be challenging. At EAS, we provide expert support for tax preparation in Atlanta, tax resolution, and accounting services. Here’s why we are the best choice for self-employed professionals:

• Certified Tax Resolution Specialists – We have the expertise to help with IRS issues, including back taxes and audits.
• Comprehensive Tax Services – Whether you need tax preparation in Atlanta or tax resolution services, we handle it all.
• Personalized Support – We tailor our services to meet your specific business needs.
• Experienced Tax Professionals – With a CPA and tax accountant in Atlanta, you get expert guidance every step of the way.
• Maximized Deductions – We ensure you take advantage of every possible tax break.
• Small Business Expertise – We specialize in helping entrepreneurs, freelancers, and independent contractors.
• Year-Round Assistance – We’re here beyond tax season to provide ongoing financial support.
• IRS Problem Resolution – If you’re dealing with tax debt, we offer expert tax resolution services in Atlanta and nationwide.
• Transparent Pricing – No hidden fees, just straightforward, professional service.
• Local and Nationwide Support – Whether you need an Atlanta tax accountant or IRS assistance from anywhere in the U.S., we’ve got you covered.

Get Expert Tax Support for Your Self-Employed Business

Being self-employed comes with many benefits, but tax planning and financial management can be complex. At Expert Accounting Services LLC, we specialize in tax preparation, accounting, and tax resolution services for self-employed individuals and small business owners.

If you need expert guidance on self-employment taxes, deductions, or IRS issues, give us a call at (404) 719-0330 or email GLG@eas.tax. Let us help you navigate your financial success with confidence!