How to Register a Business in the US from Canada

Step 1: Benefits of starting your US business from Canada

Starting a US business from Canada offers numerous benefits that can significantly enhance opportunities for growth and success. One of the primary advantages is the access to a vast and diverse market. The US boasts one of the largest consumer markets in the world, with over 330 million people and a robust economy. This expansive customer base allows Canadian entrepreneurs to tap into new segments, increase their sales, and scale their operations more efficiently compared to solely operating within the Canadian market.

Another significant benefit is the potential for more favorable business regulations and tax structures in certain US states. By choosing to establish a business in states with business-friendly climates, Canadian entrepreneurs can benefit from lower corporate taxes, reduced regulatory hurdles, and other incentives designed to attract foreign entrepreneurs. Additionally, the proximity and shared language between Canada and the US simplify cross-border operations, making it easier to manage logistics, communicate with partners, and navigate market entry. This strategic positioning enables Canadian businesses to not only diversify their markets but also hedge against local economic fluctuations, ensuring more stable and sustained growth.

Step 2: How to start your US business from Canada

Starting a US business from Canada involves several crucial steps to ensure compliance with both US and Canadian regulations. First, it's important to decide on the type of legal structure for your US business, such as a corporation (C-Corp or S-Corp), limited liability company (LLC), or partnership. Each structure has its own advantages and tax implications, so it's wise to consult with a legal or tax advisor to make an informed choice. Once you've chosen the structure, you'll need to register your business with the appropriate US state, often requiring the filing of Articles of Incorporation or Organization and paying the necessary fees.

After registration, securing an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is a necessary step, as it functions like a social security number for your business. This will be required for tax purposes, opening a US bank account, and hiring employees. Additionally, setting up a US-based bank account is crucial for handling transactions in US dollars and managing business finances more efficiently. You may also need to obtain various business licenses and permits depending on the nature of your business and the state in which it operates. Building a team of US-based legal, tax, and financial advisors can help navigate the complexities of cross-border operations and ensure that your US business is set up for success from Canada.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Canada

Understanding Compliance Requirements for Running a US Business in Canada

When expanding a US business into Canada, it is crucial to understand and comply with Canadian regulations. Different compliance requirements must be considered to ensure smooth operations and avoid legal complications. Here are some key considerations:

Corporate Registration

The first step is to register your business with the appropriate Canadian authorities. This could be at the federal, provincial, or territorial level, depending on the scope of your operations. Some important points to note:

• Federal Incorporation: Allows you to operate in all provinces and territories. This requires filing with Corporations Canada.
• Provincial Registration: Required if you plan to operate in specific provinces. Each province has its own registration requirements.
• Extra-Provincial Registration: If your business is federally incorporated but operates in specific provinces, you'll need to register extra-provincially in those provinces.

Taxation

Understanding Canadian taxation is essential for compliance. Here are key points:

• GST/HST: Goods and Services Tax (GST) or Harmonized Sales Tax (HST) is levied on most goods and services. Depending on the province, the rate and applicability may vary.
• Corporate Tax: Businesses must pay corporate tax on income earned in Canada. The rates differ between federal and provincial levels.
• Payroll Deductions: Employers must deduct Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from employee wages and remit them to the Canada Revenue Agency (CRA).

Employment Standards

When hiring employees in Canada, compliance with employment standards is crucial. Consider the following:

• Minimum Wage: Each province and territory sets its own minimum wage.
• Working Hours & Overtime: Regulations regarding maximum working hours and overtime pay vary by jurisdiction.
• Employee Benefits: Some provinces mandate specific benefits, such as parental leave and vacation pay.

Privacy and Data Protection

Canada has strict laws governing the collection, use, and storage of personal information. Key laws include:

• PIPEDA: The Personal Information Protection and Electronic Documents Act applies to private sector organizations. It requires consent for data collection and includes guidelines for data protection and privacy.
• Provincial Privacy Laws: Some provinces, like British Columbia and Alberta, have their own privacy laws that may apply in addition to PIPEDA.

Intellectual Property

Protecting your intellectual property (IP) is vital. Consider registering your IP in Canada to safeguard your business interests:

• Trademarks: Register your trademarks with the Canadian Intellectual Property Office (CIPO) to protect brand names, logos, and symbols.
• Patents: Apply for patents to protect your inventions and innovations.
• Copyrights: Copyright protection is automatic upon creation, but registration can provide additional legal benefits.

Expanding your US business into Canada involves navigating a complex regulatory landscape. By understanding and adhering to these key compliance requirements, you can establish a successful and legally compliant presence in the Canadian market.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Canada

Understanding Tax Obligations for Running a US Business in Canada

Expanding your US-based business into Canada offers exciting opportunities, but it also brings intricate tax considerations. Below are key points to keep in mind to navigate your tax obligations successfully.

1. Understanding Residency Status

The first step is determining whether your business will be considered a resident or non-resident for tax purposes. Residency status affects your tax obligations significantly. If your business has a permanent establishment (PE) in Canada, it may be considered a resident and taxed on its global income.

2. Permanent Establishment

A Permanent Establishment (PE) is a fixed place of business through which a non-resident carries out business activities. Common forms of PE include:

• A branch
• An office
• A factory
• A workshop
• A mine, oil, or gas well

If your business has a PE in Canada, you'll be subject to Canadian income tax on the income attributable to that PE.

3. Withholding Taxes

Canada imposes withholding taxes on various payments to non-residents, including dividends, interest, and royalties. The standard withholding rate is 25%, but this may be reduced by the Canada-US Tax Treaty.

4. Canada-US Tax Treaty

The Canada-US Tax Treaty helps prevent double taxation and provides clarity on tax liabilities for entities operating in both countries. Key provisions include:

• Reduction of withholding tax rates
• Definitions for residency and permanent establishment
• Guidelines for avoiding double taxation

Understanding the treaty provisions can significantly affect your tax planning and compliance.

5. Goods and Services Tax (GST) and Harmonized Sales Tax (HST)

GST and HST are value-added taxes levied on most goods and services in Canada. If your business makes taxable supplies in Canada and your total revenues exceed the small supplier threshold (currently $30,000 CAD), you must register for and collect GST/HST.

6. Payroll Taxes

If you employ staff in Canada, you are required to withhold payroll taxes, which include income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. Ensuring compliance with these requirements is crucial to avoid penalties and interest.

7. Filing Requirements

Canadian tax filings can be complex and require detailed information about your operations. Key filings may include:

• Corporate income tax returns (T2)
• Goods and Services Tax/Harmonized Sales Tax returns (GST/HST)
• Payroll remittances

Ensure you stay compliant with filing deadlines to avoid late fees and penalties.

Conclusion

Navigating tax obligations for a US business operating in Canada involves understanding residency status, permanent establishment rules, withholding taxes, and compliance with GST/HST and payroll taxes. Consulting with tax professionals familiar with cross-border taxation can help you manage your obligations effectively.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country