US Company Formation from Canada (2026): Why Canadians Usually Avoid the US LLC, C-Corp or Other Structures, the Treaty, Costs and Banking
Forming a US company from Canada: why the CRA treats a US LLC as a corporation and double tax can follow, C-Corp vs LLC, the Canada–US treaty, costs, banking.
Canadian businesses look south first. The USA is Canada's largest market, US customers are next door, and Canadian founders in Toronto, Vancouver, Montréal and Calgary routinely sell, hire and raise money in the USA. Forming a US company is remote and quick.
Canada is also the clearest example of why the US LLC is not right for everyone. The CRA treats a US LLC as a corporation, while the IRS treats a single-member LLC as transparent, and that mismatch can mean double taxation for a Canadian-resident owner. This guide explains the problem and the usual alternatives.
Short answer: a Canadian resident can own 100% of a US corporation or LLC, formed remotely, and a Canadian corporation can own a US subsidiary. With UCB, a Delaware corporation with EIN is $308 all-in, and a Wyoming corporation with EIN is $249. The Canada–US treaty taxes business profits in the USA only through a US permanent establishment and generally limits dividend withholding to 15% for individuals (5% for qualifying companies). But the CRA treats a US LLC as a corporation, so a Canadian owner of an LLC can be taxed by the USA on the income as it is earned and by Canada only when it is distributed, and foreign tax credits can be lost. Most Canadians therefore use a US C-Corporation, often owned by their Canadian corporation. Take Canadian cross-border advice before choosing an LLC.
Can a resident of Canada own a US company?
Yes. US states place no restriction on the nationality or residence of owners. Canadian citizens and residents of Canada can own 100% of a US LLC or corporation, be its only manager or director, and form it entirely remotely, with no US visa, Social Security number or US address. Every US company needs a registered agent in its state, included for the first year in every UCB formation. See registered agent explained.
Why founders in Canada form a US company
- The US market, next door and the largest in the world.
- US customers and contracts, signed by a US entity. See US subsidiary for a foreign company.
- US investors, who invest in Delaware corporations. See raising US investment as a foreign founder.
- US employees and a US office, which a US company can hire and lease.
The tax picture for residents of Canada
The US–Canada tax treaty
Canada has an income tax treaty with the USA. Dividends from a US corporation to a resident of Canada can be withheld at a reduced treaty rate, generally 15% for an individual shareholder, instead of the standard 30%, if the owner gives the payer a valid W-8BEN claiming the treaty. The treaty also says business profits are taxable in the USA only through a permanent establishment there. See W-8BEN-E vs W-8BEN explained.
On the US side: LLC or corporation?
| US LLC (single-member) | US C-Corporation | |
|---|---|---|
| US federal tax if all work is done from Canada | Usually none | 21% of profits |
| US tax when profits are paid to the owner | None (not a dividend) | Treaty rate, generally 15% for an individual owner |
| Yearly federal filing | Form 5472 + pro forma 1120 | Form 1120 + Form 5472 |
| Investors | Most will not invest | Standard (Delaware) |
A single-member US LLC owned by a non-resident is ignored for US income tax. If you do all the work from Canada, with no US office, employees or dependent agents, the income is usually not effectively connected with a US trade or business, and no US federal income tax is due. The LLC still files Form 5472 with a pro forma Form 1120 every year, and missing it costs $25,000. A C-Corporation pays 21% on its profits wherever its people work, which suits startups raising US investment and businesses reinvesting in the USA. See effectively connected income explained, Form 5472 explained and LLC vs Inc for non-residents.
For Canadians, the US view is only half the picture. Because the CRA treats a US LLC as a corporation, the LLC's US advantage can turn into double taxation. That is why a C-Corporation, which both countries treat as a corporation, is the usual choice, with Canadian rules on foreign affiliates and FAPI handled by your Canadian adviser.
The Canadian side
Points for your Canadian cross-border adviser:
- US LLCs are corporations for Canadian tax. The CRA treats a US LLC as a corporation. If the US taxes the LLC's income in your hands as it is earned, while Canada taxes you only on distributions, the timing mismatch can leave foreign tax credits unusable. The treaty's special LLC provision mainly helps US members earning Canadian income, not Canadian owners of US LLCs.
- Foreign affiliate and FAPI rules apply to a US corporation controlled from Canada; passive income can be taxed in Canada as it is earned.
- A Canadian corporation owning the US company is common, with transfer pricing between them and foreign affiliate dividend rules for profits brought home.
- Where the company is managed. A US corporation centrally managed from Canada can raise Canadian residence questions.
We handle the US side; your Canadian adviser confirms the Canadian side.
Which US state?
- Delaware: for startups and companies raising investment. See Delaware company registration and the US C-Corporation guide.
- Wyoming: a corporation without investors, at a lower yearly cost. See Wyoming LLC for non-residents.
- The state where you will operate: if the company will have an office, warehouse or staff in, say, Washington, New York or Texas, form there or register there.
Try our state selector or read best state for non-residents.
What it costs
| With UCB | |
|---|---|
| Wyoming LLC with EIN, all-in | $249 |
| Wyoming LLC with EIN and US bank account application | $348 |
| Delaware corporation with EIN, all-in | $308 |
| Keeping a Wyoming LLC active each year | $121 |
| Keeping it active plus the yearly federal return | $421 |
| US business address add-on (own suite number) | $60 a year |
State fees and the first-year registered agent are included in our formation prices, with nothing added for the state. See what a US LLC costs every year and the cost calculator.
Documents you need
| Document | Notes |
|---|---|
| Passport | Valid passport, clear colour scan |
| Driver's licence or provincial ID | Sometimes requested by banks |
| Proof of address | A recent utility bill or bank statement |
| Company name and business description | Two or three names; a specific description of what the company does |
| Home company documents | Only if your company at home will own the US company |
No SSN, ITIN or US address is needed to form the company or obtain its EIN. See EIN for non-residents.
Banking and payments
Canadian residents are generally well served by US banks and fintechs, and some Canadian banks offer US-dollar and US cross-border business banking too. Consistent details, a clear description and a US business address with your own suite number help. See Stripe for non-residents.
See US business bank accounts for non-residents, why banks reject non-resident applications and Stripe for non-residents.
Worked examples
These are illustrative examples, not client cases.
Example 1: the Toronto SaaS company. A Canadian corporation forms a Delaware subsidiary to employ US sales staff and sign US enterprise contracts. The subsidiary pays US tax on its profits; dividends to the Canadian parent are taxed under the treaty and Canada's foreign affiliate rules.
Example 2: the Vancouver freelancer. A developer asks for a Wyoming LLC. Their cross-border accountant explains the CRA's view and the double tax risk, and they invoice US clients from their Canadian business instead.
Example 3: the startup. Montréal founders raising from US venture investors form a Delaware C-Corporation.
Common mistakes
- Forming a US LLC as a Canadian resident without cross-border advice.
- Assuming the treaty fixes the LLC timing mismatch for Canadian owners.
- Ignoring FAPI on passive income in a US corporation.
- Ignoring Form 5472 because the LLC owes no US tax.
- Using the registered agent's address as the business address on bank applications.
Frequently asked questions
Should a Canadian use a US LLC? Usually not. The CRA treats it as a corporation, which can lead to double taxation. A C-Corporation is the usual choice; take cross-border advice.
Can my Canadian corporation own the US company? Yes, and it often should. The US company becomes a foreign affiliate, with transfer pricing between them.
Can I form a US company from Canada without visiting the USA? Yes. Formation, the EIN and bank applications are all done remotely. See open a US company without visiting.
Do I need an ITIN? Usually not for a single-member LLC or its EIN. See what is an ITIN and who needs one.
How UCB helps founders in Canada
We form US LLCs and corporations for residents of Canada remotely, all-in: a Wyoming LLC with EIN is $249, and our formation, EIN and bank account package is $348. Each year we keep the company active and file its federal return through our US tax filing service, working alongside your Canadian cross-border tax adviser, who confirms the Canadian side. If an LLC or a corporation clearly suits your plans better, we will tell you which and why. See also forming a US company from abroad: country guide.
Expanding from Canada to the USA? WhatsApp us at +91 8105 199 399 or email enquiries@ucbsolutions.com, and we will recommend the right structure and state for you.
Let our experts handle it for you
Every business is different. Message us with your country, business type and goals, and we will recommend the right structure, state and package. We do the work; you focus on your business.
This article is general information for non-resident business owners and is not legal or tax advice. Rules and fees change; contact us to confirm what applies to your situation.
