Crossing Borders: How to Start a Business in the US from Canada

Canadian citizens can launch businesses in the US. If you already have a registered Canadian business, you can also register to do business in all 50 states.

You can form a limited liability company (LLC) to gain liability protection, a corporation, or launch a sole proprietorship or partnership.

Read on to understand how to start a business in the US from Canada, with steps to launch your Canadian LLC or business this month!

Understanding How You Can Start a Business in the US as a Canadian Citizen

It’s not only possible to start a business in the USA from Canada; starting a business in the USA allows you to expand to new markets. The US population is approximately nine times that of Canada’s, opening many opportunities for many new clients and a larger market share.

Whether starting a new business or expanding an existing Canadian business, many US states offer a favorable business climate and tax structure to launch your company. 

Canadian business owners may also choose to start a business in the US for the benefits a limited liability company offers. In fact, you can start an LLC in the US without moving to the US. 

You can opt to file formation documents and take additional necessary steps to form a US business, or you could hire a business formation service such as doola to do it for you.

You’ll need to hire a registered agent with a registered office as your official representative within the state where you register the LLC. 

US Visa Options for Canadian Entrepreneurs

If you intend to travel to the US for business, the visa you need depends on the nature of your business and investment. Here are some options:

• E-2 Investor Visa – For Canadians who invest substantial capital in a US business.

• E-2 Visa for Buying an Existing US Business – If you purchase a business already operating in the US.

• E-2 Visa for Starting a New Business – If you’re launching a brand-new venture in the US.

• EB-5 Green Card – For Canadians investing at least $800,000-$1,050,000 in a US business that creates at least 10 jobs.

• H-1B Visa – Available for Canadian entrepreneurs who qualify as specialty occupation workers with sponsorship.

Where Should You Incorporate Your Business in the US?

The first step to launching your business in the USA is to decide where to register and form the business.

Choosing the state where you want to start or incorporate your business is a crucial first step, as it can have far-reaching implications on taxes, annual filing requirements, fees, and privacy protections. 

You can incorporate it in any state you choose. If you plan to live in the US, the best state to incorporate is usually where you live or where the business will primarily operate.

However, if you don’t live in the US, two of the best states to form an LLC are Delaware and Wyoming. These states have strong privacy laws, favorable business policies, and low or no state income tax.

Learn more about whether you should start an LLC in a state you don’t live in. 

Key Considerations: How You Can Start a Business in the US as a Canadian Citizen

Starting a business in the US as a Canadian citizen opens doors to a much larger market and provides opportunities for growth, new customers, and global expansion. 

However, Canadian founders must carefully choose the right business structure to avoid tax pitfalls.

Before diving into the steps, here are key tax implications you must keep in mind:

Important Tax Considerations for Canadian Founders

• Double Taxation Risk: Canada treats US LLCs as corporations, meaning Canadians pay taxes twice: once on the LLC’s profit in Canada and again on distributions as dividend income.

• Timing Mismatch:  The US taxes LLC owners when income is earned, but Canada taxes them when cash is distributed, creating cash flow issues.

•  Limited Tax Relief: Canada doesn’t offer foreign tax credits to offset US LLC taxes, leading to higher overall tax liability.

• Tax Compliance Complexity: Canadian founders must file US tax returns (Form 1040-NR for single-member LLCs, Form 1065 for partnerships) AND report income to the CRA.

A Better Alternative: A US C-Corp Owned by a Canadian Corporation

Instead of forming an LLC, Canadian entrepreneurs should consider forming a US C-Corp that is owned by a Canadian corporation. 

This structure provides:

• Tax Efficiency:  The US C-Corp pays 21% corporate tax (plus state taxes).

• Foreign Tax Credits: Dividends to the Canadian corporation are taxed at a reduced 5-10% rate under the Canada-US Tax Treaty (instead of 30%).

• Better Tax Compliance: The Canadian corporation can claim foreign tax credits, reducing tax burdens.

How to Start a Business in the US from Canada in 7 Steps

Now that you know the key tax considerations and why choosing the right entity structure matters, let’s talk about the steps to get your US business up and running.

1. Choose a Business Name

Selecting the right business name is essential for branding, compliance, and online presence. 

Follow these steps to ensure it’s available and legally compliant:

• Check domain and social media availability to secure branding assets.

• Verify name availability with the Secretary of State in your chosen state.

• Avoid restricted words like “bank,” “university,” or “attorney” unless you meet additional requirements.

• Search for trademarks using the U.S. Trademark Electronic Search System (TESS) to ensure it’s not already protected.

2. Select the Right Business Structure

The legal structure you choose will impact your taxes, liability protection, and compliance obligations. 

Here’s what Canadian entrepreneurs need to know:

Sole Proprietorship

• Easy to set up but offers no liability protection.

• Business income is reported on your personal tax return.

• Not ideal for those looking to limit personal risk.

Partnership

• A business with two or more owners, but partners are personally liable for debts.

• Uses pass-through taxation, meaning income is taxed at the individual level.

• High personal risk if the business faces financial or legal issues.

LLC (Not Recommended for Canadian Entrepreneurs)

• Canada classifies US LLCs as corporations, leading to double taxation.

• Income is taxed twice—once in the US and again in Canada as dividend income.

• No foreign tax credits are available in Canada to offset US LLC taxes.

• Compliance is complicated, requiring separate US and Canadian tax filings.

C-Corporation (Recommended for Canadian Entrepreneurs)

• A U.S. C-Corp pays corporate tax at 21% federally (plus any state taxes).

• Dividends to a Canadian parent company qualify for a reduced 5-10% withholding tax under the Canada-US Tax Treaty (instead of the standard 30%).

• The Canadian corporation can claim foreign tax credits, reducing or eliminating double taxation.

Final recommendation from doola: Avoid forming an LLC due to double taxation issues. Instead, set up a U.S. C-Corp owned by a Canadian corporation to maximize tax efficiency.

3. File to Incorporate

Once you’ve selected the right structure, the next step is to officially register your business in the US. This involves filing the necessary incorporation documents with the Secretary of State in the state where you plan to operate.

 If you’re forming a C-Corporation, you’ll need to submit the Articles of Incorporation, which outline essential details about your business, including its name, purpose, and ownership structure.

Since you’re a non-US resident, you must appoint a registered agent in your chosen state. This is a legal requirement, as the registered agent acts as your official representative, receiving important legal and tax documents on behalf of your business.

Each state has its own filing fees, which vary depending on where you incorporate. Some states, like Delaware and Wyoming, are popular for their business-friendly regulations and lower fees, while others may have more complex requirements.

To streamline the process and ensure compliance with US regulations, many Canadian entrepreneurs choose to work with a business formation service like doola, which can handle everything from filing paperwork to setting up a registered agent for you.

4. Obtain an EIN (Employer Identification Number)

An Employer Identification Number (EIN), also known as a Federal Tax ID Number, is essential for operating your business in the US. Without an EIN, you won’t be able to open a US business bank account, file tax returns, or hire employees if needed.

Applying for an EIN is a straightforward process. The fastest way is through the IRS website, where you can complete the application online. If you don’t have a US Social Security Number, you’ll need to submit Form SS-4 by fax or mail, which takes longer to process.

doola can handle the entire process for you. Book a free consultation with our experts today.

5. Obtain Licenses and Permits

Before operating, ensure your business has the necessary permits and licenses.

• General business license: Required in most states.

• Industry-specific licenses: Businesses in regulated industries (e.g., healthcare, finance, food services) need additional permits.

• Sales tax permit: Needed if selling taxable goods or services in the US.

You can check requirements through:

• The Secretary of State website for general licenses.

• The Small Business Administration (SBA) website for industry-specific permits.

6. Open a Business Bank Account

Opening a business bank account is important to separate business funds from personal funds. It makes accounting simpler and can also help protect your personal assets in case of business liability.

As mentioned earlier, you’ll need an EIN to open any business bank account. We recommend using Mercury as it supports non-US residents with or without a US SSN. They give you an FDIC-insured bank account set up easily online.

You can also open a US PayPal account. 

7. Maintain Compliance and File Reports

Once your business is up and running, staying compliant with US regulations is essential to maintain its good standing. Most states require businesses to submit annual or biennial reports, depending on state laws. These filings confirm that your business is still active and operating under the correct legal structure.

In addition to state compliance, you may also need to pay state business taxes, such as franchise or corporate taxes, which vary depending on the state where your business is registered. 

On the federal level, a U.S. C-Corp must file Form 1120, while an LLC (if applicable) must file either Form 1065 or 1040-NR, depending on its tax classification.

For Canadian business owners, compliance doesn’t end in the US. Since Canada treats US business income differently, you must also ensure proper tax reporting with the Canada Revenue Agency (CRA) or just talk to one of our tax consultants to get a fair idea of the entire process. 

What Are Your Tax Responsibilities?

Tax compliance when starting a business in the US from Canada is essential. The USA and Canada have a tax treaty to prevent double taxation and facilitate citizens from both countries working in the other country.

There’s also a trade relationship called the United States-Mexico-Canada Agreement or USMCA which can affect taxation policies for certain businesses.

In addition, the business structure you choose and whether you elect to use pass-through taxation or file as a corporation will affect tax obligations. State taxes also vary based on where the business is formed and operating.

You can book a free consultation with a tax professional or CPA who understands both US and Canadian tax laws extensively.

Scaling Your US Business as a Canadian Founder

Once your business is running smoothly, the next step is scaling your operations to increase revenue and expand your reach.

If you need to hire employees or contractors, you’ll need to comply with US labor laws. Hiring US-based employees requires an Employer Identification Number (EIN) and payroll tax compliance.

If you prefer to keep overhead low, working with independent contractors is a flexible option, as they are responsible for their own taxes.

Securing business financing is another consideration when scaling your business.

While Canadian business owners may not initially qualify for US business loans, establishing business credit in the US can open up financing opportunities. Building a strong business credit profile through timely payments and responsible credit usage can help you qualify for lines of credit, business loans, or investor funding.

Marketing is also essential for scaling in the US. Since customer behavior and competition differ from Canada, adapting your marketing strategy to the US audience is crucial.

Utilizing SEO, paid ads, social media, and influencer partnerships can help build brand awareness and attract more customers.

Create Your US Business With doola by Your Side

Expanding your business into the US is exciting, but it comes with its fair share of paperwork, tax rules, and legal hoops to jump through.

For Canadian founders, figuring out the right business structure, staying compliant, and avoiding double taxation can quickly become overwhelming.

That’s where doola comes in. We take care of the business formation, EIN registration, and compliance filings, so you don’t have to spend hours deciphering legal jargon or worrying about tax pitfalls.

Whether you’re setting up a US C-Corp, securing a registered agent, or managing cross-border finances, we’ve got your back. Every step of the way.

Start with doola today by booking a free consultation with one of our experts.

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