Registering a US LLC or C-Corporation
I spent most of the day on the phone with lawyers and accountants and I am left more confused than ever.
I am currently running a sole proprietor business that I need to incorporate. That decision is made - the area I'm in has a fair amount of exposure to liability so I need to get the liability protection. It's too bad, because in all other respects being a sole proprietor is fantastic.
98% of my business is in the US. I have no physical presence in the US, however.
So I've been considering whether to incorporate as/in:
- Delaware LLC
- Delaware C-Corp
If I had a perfect world I'd just register as an Alberta/Federal LLC. I love the ability to keep my personal name on accounts (they're all set up) and just "flow-through" my income like a sole proprietor for tax purposes. Alas, Canada strikes again by not offering anything like it.
So, I spoke at great length to an accountant and he provided some really interesting (but problematic) advice.
I initially was leaning towards a Delaware LLC, but the trouble is the CRA does not recognize an LLC as sole proprietor income. That means I'd get double taxed - as a sole proprietor in the US, then again as a corporation when the profits returned to Canada. He estimated doing this would make a tax liability of approximately 49%, which is crazy.
He suggested a solution I can find nobody else using online - using a bare trust to "hold" the LLC and maintain my status, for tax purposes, as a sole proprietor in Canada.
He suggested this would avoid double taxation issues and still afford me liability protection. He estimated this would reduce my tax liability to about 42%, which is still crazy.
I am leery - he seems ultra knowledgeable, maybe even to a fault! I am hesitant to use complicated instruments that I do not completely understand. I am not a fan of being at the mercy of my accountant or law firm if something went sour, because I do not understand how to manage it myself.
Does anyone else have experience incorporating in the US, and how did you handle the tax problems?