For Canadian owner-led companies
Expanding Your Canadian Business to the US
Choose the right US structure, set up books and payroll that work in both countries, and know every first-year filing before it is due. Led by Gurleen Kaur, CPA licensed in British Columbia and Washington State.
Canadian parent
US branch or subsidiaryOne CPA licensed in both countriesFixed fee after scopingQuick answer
What does a Canadian company need to expand into the US?
First, a structure decision: operate as a branch of the Canadian company, which files Form 1120-F, or form a US subsidiary, which files Form 1120. Under IRS Tax Treaty Table 1, dividends from a US subsidiary to a Canadian parent generally owning 10% or more of the votes are taxed at a 5% treaty rate. Then an EIN, US banking, books that consolidate with the Canadian company, documented intercompany terms, payroll and state registrations. In Canada, a US subsidiary usually means filing Form T1134 each year. The right answer depends on your liability, people, profits and plans to bring money home.
Branch, subsidiary or LLC: side by side
Each cell links to the IRS, CRA or FinCEN source. Treaty rates require eligibility and documentation.
| US branch | US subsidiary (C corporation) | US LLC owned by the Canadian company | |
|---|---|---|---|
| What it is | The Canadian company does business in the US directly | A separate US corporation owned by the Canadian company | A US LLC owned by the Canadian company |
| Main US return | Form 1120-F (instructions) | Form 1120 at the 21% federal rate, plus state (instructions) | Disregarded by default: treated like a branch, and the LLC files a pro forma Form 1120 with Form 5472 (instructions) |
| Profits back to Canada | Branch profits tax, generally at the treaty direct dividend rate (Table 1, note aaa) | Dividends: 5% treaty rate for a parent generally owning 10% or more of the votes, 15% otherwise (Table 1) | As for a branch, because the US looks through the LLC |
| FinCEN BOI | A Canadian company registered to do business in a US state is still a reporting company (FinCEN) | US-formed companies are currently exempt | US-formed companies are currently exempt |
| Canadian side | Profits taxed in Canada with foreign tax credit rules | Foreign affiliate: Form T1134 within 10 months (CRA); T106 where required | Canada generally treats the LLC as a corporation and foreign affiliate |
| Common fit | Testing the market with limited US presence | Hiring, leasing or selling at scale in the US | Rarely the best fit; see our LLC guide |
A Canadian company that claims it has no US permanent establishment still generally files Form 1120-F to show the treaty exemption, and discloses the position on Form 8833. Read more about the US LLC double-tax risk for Canadians.
What the expansion package includes
A fixed-fee project covering structure, setup and year one. Ongoing bookkeeping and annual filings continue under a separate monthly engagement if you want them.
Structure decision
Branch, US subsidiary or another structure, compared on your expected profits, people and plans to bring money home.
Entity and EIN
Formation coordination with your lawyer, EIN application for a foreign-owned company (Form SS-4) and US banking documents.
Books built for two countries
US chart of accounts, monthly close process and reporting that consolidates with the Canadian company.
Intercompany terms
Management fees, loans, cost sharing and sales between the companies, documented on arm's-length terms in both countries.
People and payroll
Employee versus contractor review, payroll provider setup coordination and the federal filings in Publication 15, such as Form 941 and Form W-2.
States and sales tax
State registrations, state income tax exposure and sales tax registration review for the states you sell into.
First-year filing calendar
Every US and Canadian deadline for year one in one calendar: Form 1120 or 1120-F, Form 5472, state returns, payroll filings, T1134 and T106.
Mistakes we see most often
- Forming a US LLC by default. It often creates a mismatch between how the US and Canada see the same entity.
- Wiring money without paperwork. Informal funding makes loans, fees and dividends hard to support in both countries.
- Assuming no US return is due. A treaty exemption still generally needs a Form 1120-F filing to claim it.
- Hiring before payroll is ready. US employees bring federal and state payroll filings from the first paycheque.
- Forgetting the Canadian side. T1134 and T106 obligations sit with the Canadian company, not the US one.
How it works
- Free 15-minute fit call. Your plans, timeline and current structure.
- Scoping and fixed fee. We confirm what the project covers and send a written scope.
- Structure memo. Branch versus subsidiary compared on your numbers, coordinated with your lawyer.
- Setup. EIN, books, intercompany terms, payroll and state registrations.
- Year-one calendar. Every US and Canadian deadline, owned and tracked.
Who this is for
- Canadian corporations opening a US office, warehouse or sales team
- Canadian companies hiring their first US employee
- Founders moving to the US on an E-2 visa while keeping a Canadian company
- Owner-led businesses that already sell into the US and need to check whether they owe US filings
US expansion questions
Should my Canadian company open a US branch or a US subsidiary?
It depends on liability, how profits will come back to Canada, who will own the US business and how much US activity you expect. A branch means the Canadian company itself files a US return (Form 1120-F) and may owe branch profits tax. A US subsidiary is a separate US corporation that files Form 1120, with treaty withholding on dividends paid to the Canadian parent. We compare both on your numbers before anything is formed.
Does a Canadian company selling into the US have to file a US return?
If it is engaged in a trade or business in the United States, the IRS Form 1120-F instructions say it must file Form 1120-F, even when that income is exempt under a tax treaty. A company claiming treaty protection because it has no US permanent establishment generally files to show the exemption and discloses the position on Form 8833.
What US tax applies to dividends from a US subsidiary to its Canadian parent?
IRS Tax Treaty Table 1 lists a 5% direct dividend rate for Canada, which generally applies to a parent corporation owning at least 10% of the voting stock, and a 15% general rate. Treaty eligibility conditions apply, and the parent must document its treaty claim to the payer.
Is a US LLC a good choice for a Canadian company?
Often not. By default the US treats a single-member LLC as disregarded, so a Canadian company owning one is treated as doing business in the US directly and the LLC still files a pro forma Form 1120 with Form 5472. Canada generally treats the LLC as a corporation. Read our US LLC guide before forming one.
What changes on the Canadian side when we open a US subsidiary?
The US subsidiary is usually a foreign affiliate of the Canadian parent, so the parent files Form T1134 with the CRA within 10 months of its year end for tax years beginning after 2020. Transactions with the subsidiary, such as management fees, loans or sales, may also need Form T106 reporting. Intercompany pricing should be documented on arm's-length terms in both countries.
Do we need to register for US sales tax?
There is no US federal sales tax, but each state sets its own registration rules, including thresholds based on sales into the state. We review where you sell and coordinate registrations with the states that apply.
How much does the expansion package cost?
The fee is fixed after a scoping call. It depends on the structure, the number of states, whether you hire US employees and how much intercompany activity there will be. Ongoing monthly bookkeeping and annual filings are quoted separately.
Sources
US rules link to the IRS, Canadian rules to the CRA and beneficial ownership rules to FinCEN. We re-check them before each engagement.
- IRS: Instructions for Form 1120-F (foreign corporations)
- IRS: Instructions for Form 1120
- IRS: Instructions for Form 5472
- IRS: Tax Treaty Table 1 (withholding rates by country)
- IRS: About Form 8833 (treaty-based return position)
- IRS: United States income tax treaties A to Z
- IRS Publication 15, Employer's Tax Guide
- IRS: Instructions for Form SS-4 (EIN)
- CRA: Information returns relating to foreign affiliates (T1134)
- CRA: Form T106, non-arm's length transactions with non-residents
- FinCEN: Beneficial ownership information reporting
Gurleen Kaur, CPA licensed in British Columbia and Washington State. Last updated October 21, 2026. This page is general information, not tax or legal advice for your situation.
Plan your US expansion with a CPA licensed on both sides
Tell us your situation in a few lines. The first 15-minute fit call is free. We confirm whether we can help, what records matter and the next step. Substantive advice begins under a paid diagnostic or signed engagement.