stardust, the US entity is taxed. it does not matter that you are a canadian resident or not, unless you are referring to the tax liability when you remove some of your profits from the US company to pay you. you could offset some expenses anyway (computers, data providers, whatever) and anyway the company would have the lower tax rate. OK, anyway, that's probably too much trouble. It depends what you want. tntneo
tntneo........yes the U.S. corp would pay the lower tax rate. But when profits are re-patriated into the pocket of the Cdn owner they would be taxed at the much higher Cdn rate as compared to the Cdn being domiciled and taxed in U.S. with no further "residential / tax ties" to Canada. It's easier to "expense out" perks and quasi personal benefit expenses in a U.S. corp than Canada, but this alone probably wouldn't justify jumping through all the logistical hoop$. For a Cdn wanting to remain a Canadian resident there may be possibilities to utilize a barbados corp owned by a Canadian corp (paying the extremely low rate of Barbados corp tax, I think it's 5% of "net" income) Then under the Canada- Barbados tax treaty profits repatriate tax free back to a cdn parent corp and in turn to cdn shareholders. The Barbadian corp would open the trading accounts and owe no U.S taxes as a foreign non U.S. resident corp. (W8 status) But more complex structure and not sure if the nature of this business(Financial Trading) would qualify for the Barbadian scenario under Canadian tax regulations. However, the concept is worthy of further research. Any Canadian C.A.'s here care to comment on this?
Maybe I had it wrong. Maybe it was $3.75 CDN per gallon. I know it was over $3. I'm pretty sure gas is going to more expense in large Ontario cities as opposed to Alberta. I think at the time it something like $2.05 per gallon in Michigan.
there are 2 reasons to open an LLC in the US: 1) brokers will not allow canadians to open accounts in the states unless we are established in the US (LLC or Company). so that takes care of allowing us to trade from any US broker as opposed to canadian brokers that charge on average 6 times more and higher on similar trades in the US. 2) I may be naive but can't a canadian open a simple LLC in Delaware (through www.bizfilings.com) for a few hundred dollars and trade tax free from both the state of Delaware, and the Federal govt, as long as profits are not repartiated in Canada. I have read that this is possible. I don't see any real costs associated with this structure. Can anyone add to this post? thanks
e shadoe, your points are valid. regarding the second one, the IRS would expect you to distribute earnings at one point. There is a limit acceptable of earnings kept in the US corp (not distributed) around $200 000 I think. but after that (well.. ) you really are supposed to distribute it otherwise red flags will target your corp. as long as the money is not paid to you, only the corp is liable to taxes. You still have to pay federal income tax though (only the state tax is waived). when you pay yourself (not a salary, just fees it's OK) you also pay income tax in US (starting at 15% when tax treaty is requested) you pay the rest to canada. the barbados case highlighted earlier is in theory possible but most CA, CTA will advise you against it. small potatoes individuals like us are really at a disadvantage and will get caught. You really need to be a big ugly Enron to get away with it. the US corp really makes sense for canadian traders because canada makes it so difficult to be a trader. tntneo
thanks tntneo for the info. can you take a look at the following link: www.offshoreinfo.com/Articles/azzara.html he's called the tax haven reporter. and the way i read this is that a canadian company who's only purpose is to trade in securities, even if he transacted within the US (which is not my case anyway) does not have to pay any taxes on capital gains? it's all in the first paragraph and it says that even federal taxes are not applicable. what do you make of that? thanks for your thoughts. p.s. if that is true then a Delaware LLC with a Florida address (obviously with a Delaware Registered Agent for proper address purposes) and a US broker account would enable any canadian to operate a Us broker account and tax free. No? as long as the capital gains would not be repartiated to Canada? then it's a different business entirely, but at that point couldn't you just send the gains elsewhere? p.s.s. I know that if you open an LLC in other states, such as Florida, it will charge you a franchise of 5.5% on some of the net income.
I have been thinking of LLC idea for quite awhile. Does anyone know if there's any particular hassle/expenses for a LLC whose only purpose is trading securities? Do we need do reports/forms regularly? Or do we need to hire an account/lawyer? Thanks for your input.
From the professional side (vs. retail) there are problems....the main concern is that the individual trader has to be licensed, and become a member of the trading firm as an individual. As far as retail is concerned, I think there may be concerns as to liability issues to the brokerage firm.
I think you would be well advised to seek professional cousel on the subject - the information here probably will hurt more than it helps. This area (international taxation and avoidance) is a extremly complicated one to say the least. I am a CMA who has had some, very limited, experience in the area. if you are making enough money to worry about about tax free havens or even incorporation in USA ,with a residence in Canada you should get professional help. One of the best firms in Canada is felesky flynn http://www.felesky.com who are lawyers who do nothing but tax related work. I think they only bill out at $600 per hour
true no capital gains, that's true for individuals or offshore companies (they pay taxes in the home country, if it has taxes). however, I think it is a bit more difficult to justify no tax for the US corp (even with no office in US) when it is registered in a US state. If someone knows how to dow it... tntneo