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.
If you plan to travel to the US for business, you can get a business visa depending on your business purpose. The types of US business work visas for international founders, including Canadians starting a business in the US, are:
- E-2 Investor Visa for Canadians
- E-2 Visa for Canadians Buying an Existing U.S. Business
- E-2 Visa for Canadians Starting a New U.S. Business
- EB-5 Green Card for Canadian Citizens
- H-1B Visa for Canadian Entrepreneurs
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.
How to Start a Business in the US from Canada in 7 Steps
If you’re ready to launch a business in the USA from Canada and prefer a DIY method, you can follow these steps.
1. Choose a Business Name
Deciding on a good business name is essential for business success. Consider names that are unique, memorable, and related to the business offerings. Be sure to check for web domain and social media availability to see what similar businesses are already online and to ensure that you can build a strong web presence for the LLC marketing strategy.
You’ll also need to check the Secretary of State’s website where you plan to form the LLC. You can’t choose an LLC name already taken in the state. Depending on state laws, you must include a limited liability company, LLC, or L.L.C. in the name.
In most states, you can’t use restricted words like attorney, university, or bank without meeting additional criteria. And be sure to double-check that the intended name isn’t already trademarked!
Choosing an LLC Name Checklist:
- Brainstorm names
- Check the domain name and social media handle available
- Look for businesses with similar names
- Search with the Secretary of State to confirm that no other business is registered with that name
- Use the U.S. Trademark Electronic Search System to ensure the name isn’t trademarked
2. Decide on a Business Structure
Next, you’ll need to determine the legal structure of your business. This will affect taxation, administration, and filing requirements. Here are the most common options.
A sole proprietorship is the simplest business structure to set up. You don’t need to register anything, although you may still need business licenses depending on your industry. A sole proprietorship means you’re the only owner of the company. This simplifies administration. You’ll also pay taxes for the business on your individual income tax return.
The disadvantage of a sole proprietorship is that you’re not protected from legal liability. The business also isn’t considered a separate business entity. That means if anything happens or the business is sued, you’re personally liable.
A partnership is the next simplest structure. Instead of forming the company alone, in a partnership, you’ll form a company with two or more owners. There are no specific filing requirements for partnerships, and it also uses pass-through taxation, simplifying administration.
However, a partnership also has the same disadvantages as a sole proprietorship. The business also isn’t considered a separate business entity, so you’re not protected from legal liability. If anything happens or the business is sued, you’re personally liable, and both partners’ personal assets could be lost for business debts.
A limited liability company combines the simplified administration of a sole proprietorship or a partnership with excellent liability protection. Forming an LLC is fast and usually requires only a few simple filings.
With an LLC, you have a separate business entity that protects the LLC owners and their assets. The advantages of running an LLC are simplified filing, flexible structure, and strong liability protection.
A C-corporation is a business entity taxed separately from its owners. It can have an unlimited number of shareholders and can issue stock. Compared to an LLC, corporations must meet more administrative requirements. A C-corporation must meet corporate formalities and keep corporate records.
Corporations also don’t offer pass-through taxation, which means the business income could be double taxed because the corporation will have to pay income tax, and you’ll also have to pay income tax on your individual earnings. A corporation is the best business structure if you plan to take the company public and issue stock.
3. File to Incorporate
The steps to file to incorporate will depend on the business entity you choose. To form an LLC or a corporation, you must file with the Secretary of State or the Department of Corporations in the state where you plan to register your business. You can find steps to form an LLC in all 50 states on doola.
4. Get an EIN
After forming the LLC, you’ll need to apply for an employer identification number or EIN with the IRS. You can apply for an EIN online, over the phone, or by mail. You’ll get the fastest processing with an online application.
5. Obtain Licenses and Permits
After you’ve formed the company, you’ll need to obtain any necessary licenses or permits to operate in the state. This can include industry-specific business licenses or a general business license. Licensing requirements and permits vary by state. You can contact the Secretary of State and the local Chamber of Commerce to understand the requirements where you plan to operate the business.
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. You’ll need an EIN to open the business bank account. You can also open a US PayPal account.
7. File Your Reports
It’s important to maintain the business in good standing by filing reports annually. Filing costs and procedures vary by state and type of business entity. However, most states allow you to file online for an LLC or a corporation. You’ll also need to pay the state-specified annual registration fees.
What Is the Role of a US Registered Agent?
A US-registered agent is the official representative of your company in the state. They must meet specific requirements. While state laws specify the exact criteria, in most states, the registered agent must be at least 18 years old and a state resident.
The registered agent must have a registered address, which is the physical address where the state and the public can reach the business during regular business hours. You will need a registered agent for any business structure when starting a business in the US.
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 speak with a tax professional or CPA who understands both US and Canadian tax laws to ensure correct filings.
Create Your US Business With doola by Your Side
For most business owners, an LLC offers the best of both worlds. You get liability protection and privacy from a legal business entity but with simplified administration and pass-through taxation. If you’re ready to form an LLC in the USA, doola can help. Learn more about doola’s services for Canadians here.
Then, get doola’s fast and professional formation services in all 50 states, including the most popular states like Wyoming and Delaware. You’ll also get help with getting an EIN and opening a bank account so you can focus on launching the business. Get doola here!
How long does it typically take to start a business in the US from Canada?
The time it takes to start a business in the USA from Canada depends on the business structure and the state where you file. Sometimes, you can create a business in the USA within the same day of filing online or in person. In other cases, it can take up to four weeks to form an LLC, get an EIN, and open a business bank account.
Can I hire employees in the USA for my business?
Yes, you can hire employees in the USA for your USA business. You must register in at least one US state and have an EIN to hire employees.
Do I need a physical presence in the USA to start a business?
Yes, you need a physical presence in the USA to start a business. However, you can hire a registered agent to act as your physical representative in the state where the company is registered for business. The registered agent must also have a registered address for the business.
How can I find a suitable business idea for the US market?
To find suitable business ideas, consider in-depth market research in your chosen industry. Look at what competitors are doing, and consider unique offerings that fill a need of your target market.
How can I protect my intellectual property rights when starting a business in the USA?
You can protect your intellectual property rights by registering your IP with the US Patents and Trademarks Office. You can also use non-compete agreements or non-disclosure agreements with employees and partners.
Can I fund my business in the US from Canada?
Yes, you can fund your US business from Canada. After registering the business in the USA, you might be eligible for additional funding sources.
What types of visas are available for Canadian entrepreneurs to start a business in the US?
There are four types of visas Canadian entrepreneurs can consider: Temporary Investor Visa E1 & E2 Visa, Permanent Investor Visa EB-5 Visa, Business Expansion Visa L-1 Visa, or US Corporate Immigration.