QUESTION:
Hi David,
My wife and I recently moved to Canada. In Virginia, she owned a limited
liability corporation. In BC she was advised to form a corporation with
herself and me as its only employees. She did.
Now we need to know how to run a Canadian corporation with a particular
emphasis on taxes. This is a small Company with expected gross income of
about $120,000. Any advice or direction would be greatly appreciated.
Thank you for your help in this matter.
Simcerely,
=========================================
david ingram replies:
It would be "very" unusual for me to advise US citizens in Canada to form a
corporation with the shareholders being the only employees.
In fact, I cannot imagine a situation where I would do so.
1. You have to file forms 5471 each year to the US government with your
1040 tax return. This doubles or triples your accounting fees.
2. You will be signing personal guarantees with anybody you deal with to
start off with and as the employee doing whatever work or actions done by
the corporation, you are personally liable for any actions of the
corporation.
3. Unless your home is already paid for, it is difficult to make your
Canadian Mortgage deductible if you have a corporation, easy if you are a
proprietorship or partnership.
4. A combination of salaries and dividends is just as much tax as a
partnership would pay or even 1/2 a percent more. You can NOT or should NOT
leave retained earnings in the Canadian Corporation because of the form 5471
mentioned above which makes you report internal retained earnings of the
Canadian Corporation on your US 1040 and pay tax even though you do not have
the money.
5. Failure for each of you to file the 5471 form will / can result in a fine
of $10,000 for the first 90 days and $10,000 every 30 days to a maximum of
$50,000 per shareholder per year.
You need to sit down with someone like myself who understands Canadian and
US taxes at the same time. I assume you are US citizens and US citizens
must continue to file US tax returns no matter where they live and no matter
where their income is from. If you are not in the Vancouver area, I do
phone consultations for a minimum fee of $350.00 for up to an hour.
My likely advice will be to dump the corporation.
The Instructions for form 5471 can be read here
http://www.irs.gov/pub/irs-pdf/i5471.pdf
The actual form is at:
http://www.irs.gov/pub/irs-pdf/f5471.pdf
Some of the extra schedules are at:
Schedule J
http://www.irs.gov/pub/irs-pdf/f5471sj.pdf
Schedule M
http://www.irs.gov/pub/irs-pdf/f5471sm.pdf
Schedule N
http://www.irs.gov/pub/irs-pdf/f5471sn.pdf
Schedule O
http://www.irs.gov/pub/irs-pdf/f5471so.pdf
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram host a LIVE talk show called "ITS YOUR
MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
Local calls are taken at (604) 280-0600 and Long Distance calls are taken at
1( 866) 778-0600
Callers to the show are invited to attend free seminars on financial
planning with such specialities as deductible mortgage interest. They are
held at Fred Snyder's Office at 1764 West 7th in Vancouver - (604) 731-8900
for more information.
=========================================
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com> www.david-ingram.com
<http://www.david-ingram.com/>
Disclaimer: This question has been answered without detailed information or
consultation and is to be regarded only as general comment. Nothing in thi
s message is or should be construed as advice in any particular
circumstances. No contract exists between the reader and the author and any
and all non-contractual duties are expressly denied. All readers should
obtain formal advice from a competent and appropriately qualified legal
practitioner or tax specialist in connection with personal or business
affairs such as at www.centa.com <http://www.centa.com> . If you forward
this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
==============================
Ask a cross-border International real estate rental mutual funds immigration
non-resident income tax expert - David Ingram 's CEN-TA Services in North
Vancouver BC Canada on It's Your Money CKBD AM600 Fred Snyder's Radio Show
This from "ask an income tax and immigration expert" from www.centa.com
<http://www.centa.com/> or www.jurock.com <http://www.jurock.com/> or
www.featureweb.com <http://www.featureweb.com/> . David Ingram deals on a
daily basis with expatriate tax returns with:
multi jurisdictional cross and trans border expatriate problems for the
United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait,
Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France,
Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia,
Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran,
India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba,
Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK,
GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas,
San Antonio and Houston Texas
Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration
Tips, Income Tax and ImmigrationWizard Income Tax and Immigration Guru
Income Tax and Immigration Consultant Income Tax and Immigration Specialist
Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist
expert preparer consultant expatriate anti money laundering money seasoning
FINTRAC E677 E667 4789 4790 TDF-90 Reporting $10,000 cross border
transactions
=========================
Alaska, Alabama, Arkansas, Arizona,
California, Colorado, Connecticut,
Delaware, District of Columbia, Florida,
Garland, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon.
Pennsylvania, Rhode Island, Rockwall,
South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavit Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas Taxman and Tax Guru and wizzard
wizard - consultant - expert - advisor -advisors consultants - gurus - Paris
Prague Moscow Berlin
Lima Rio de Janeiro, Santaigo
============================
New York, Boston, Sacramento, Minneapolis, Salem, Wheeling, Philadelphia,
Pittsburgh, Atlanta, Pensacola, Miami, St Petersburg, Naples, Fort Myers,
Cape Coral, Orlando, Atlanta, Arlington, Washington, Hudson, Green Bay,
Minot, Portland, Seattle, St John, St John's, Fredericton, Quebec, Moncton,
Truro, Atlanta, Charleston, San Francisco, Los Angeles, San Diego,
Sacramento, Taos, Grand Canyon, Reno, Las Vegas, Phoenix, Sun City, Tulsa,
Monteray, Carmel, Morgantown, Bemidji, Sandpointe, Pocatello, Bellingham,
Custer, Grand Forks, Lead, Rapid City, Mitchell, Kansas City, Lawrence,
Houston, Albany, Framingham, Cambridge, London, Paris, Prince George, Prince
Rupert, Whitehorse, Anchorage, Fairbanks, Frankfurt, The Hague, Lisbon,
Madrid, Atlanta, Myrtle Beach, Key West, Cape Coral, Fort Meyers, Berlin,
Warsaw, Auckland, Wellington, Honolulu, Maui, Kuwait, Molokai, Beijing,
Shanghai, Tokyo, Manilla, Kent, Winnipeg, Saskatoon, Regina, Red Deer, Olds,
Medicine Hat, Lethbridge, Moose Jaw, Brandon, Portage La Prairie, Davidson,
Craik, Edmonton, Calgary, Victoria, Vancouver, Burnaby, Surrey, Edinburgh,
Dublin, Belfast, Glasgow, Copenhagen, Oslo, Munich, Sydney, Nanaimo,
Brisbane, Melbourne, Darwin, Perth, Athens, Rome, Berne, Zurich, Kyoto,
Nanking, Rio De Janeiro, Brasilia, Colombo, Buenos Aries, Squamish,
Churchill, Lima, Santiago, Abbotsford, Cologne, Yorkshire, Hope, Penticton,
Kelowna, Vernon, Fort MacLeod, Deer Lodge, Springfield, St Louis, Centralia,
Bradford, Stratford on Avon, Niagara Falls, Atlin, Fort Nelson, Fort St
James, Red Deer, Drumheller, Fortune, Red Bank, Marystown, Cape Spears,
Truro, Charlottetown, Summerside, Niagara Falls, Albany
--
No virus found in this outgoing message.
Checked by AVG Anti-Virus.
Version: 7.0.300 / Virus Database: 265.8.5 - Release Date: 2/3/05
--
No virus found in this outgoing message.
Checked by AVG Anti-Virus.
Version: 7.0.300 / Virus Database: 265.8.5 - Release Date: 2/3/05
What's Related