Hey there, fellow Canadian business owner! If you’re running a business in Canada but also operating in the USA, you know how important it is to stay on top of compliance, legal, and beneficial ownership reporting requirements. Navigating the different regulations and laws in both countries can be a challenge, but with the right knowledge and resources, you can ensure that your business is operating smoothly and within the boundaries of the law. In this blog, we’ll explore the key requirements you need to know to keep your business in good standing on both sides of the border. So grab a double-double and let’s dive in!

Registration Requirements

The United States consists of 50 states and 5 territories, each with its own set of business regulations. To operate legally, businesses must adhere to both state-specific rules and federal laws.

State-Level Registration:

When establishing a business presence in the United States, businesses from Canada must complete state-level registration in any state where significant business activities occur. This requirement typically applies if your company:

• Has a physical presence in the state
• Frequently meets with clients in the state
• Derives a significant portion of revenue from the state
• Has employees working in the state

Incorporating your Canadian Company in the US

Even if none of the specific criteria apply, a Canadian company must still choose a home state for registration when conducting business in the US. This involves forming a U.S. entity, such as a corporation, LLC, or other business structure, in that state. This registration ensures that the company is officially recognized and compliant with US regulations, regardless of its level of business activity in any individual state.

The newly formed U.S. entity will operate as a subsidiary of the foreign company. This means that while the U.S. entity is legally independent, it remains under the ownership and control of the parent company based in Canada. This structure allows the company to conduct business in the US while maintaining its international headquarters.

We recommend using Northwest Registered Agent if your foreign company needs to incorporate. They offer expert guidance and can serve as a reliable registered agent for your business, ensuring compliance and smooth operations.

Federal Requirements

In addition to state requirements, Canadian companies must also comply with federal regulations:

• Federal Tax ID: Obtain an Employer Identification Number (EIN) from the IRS. This number is essential for tax reporting and opening U.S. bank accounts.
• Industry Regulations: Companies may need to follow specific federal regulations depending on the industry. For example:
• Import/Export Laws: If the company is involved in importing or exporting goods, it must meet U.S. customs regulations. This includes adhering to rules for tariffs, duties, and necessary documentation.

Beneficial Ownership Information Reporting Requirements

For Canadian businesses conducting operations in the U.S., adhering to Beneficial Ownership Information Reporting (BOIR) requirements is crucial. The Corporate Transparency Act mandates that companies disclose the individuals who own or control them. This applies to most entities, including those that are incorporated or registered in any U.S. state. The goal is to enhance transparency and combat illicit activities such as money laundering and terrorism financing.

A beneficial owner is an individual who controls the company or owns 25% or more of its shares, either directly or indirectly. For compliance with BOIR requirements, businesses must report information about these individuals, including their names, addresses, and identification details. Failure to file this report can result in significant penalties and legal consequences. Therefore, companies from Canada need to ensure they meet these reporting obligations promptly and accurately.

For your convenience, you can file your Beneficial Ownership Information Report directly on our website. Click here to complete the process in just a few minutes and ensure your business complies with U.S. regulations.

Additional Considerations for Canadian Businesses:

Tax Treaties

The tax treaty between the USA and Canada offers significant advantages for businesses operating across borders. It helps prevent double taxation, provides clarity on tax obligations, and establishes protocols for resolving tax-related disputes. Canadian businesses operating in the USA can benefit from reduced withholding tax rates on certain types of income and gain access to specific tax exemptions. For more detailed information about the tax treaty and its provisions, click here to access the official IRS documents.

Trade Considerations

As a Canadian business looking to trade with the USA, it’s crucial to be aware of the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA in 2020. This agreement governs trade relations between the three countries and impacts various sectors, including automotive, agriculture, and intellectual property. Familiarize yourself with the specific provisions relevant to your industry, such as rules of origin, tariff schedules, and customs procedures. Additionally, be mindful of any sector-specific regulations or standards that may apply to your products or services when entering the US market. It’s advisable to consult with trade experts or legal professionals to ensure compliance with all applicable laws and regulations, as well as to take advantage of any preferential treatment offered under the USMCA.

Your Path to Compliance: Key Takeaways for Canadian Businesses in the U.S.

Operating a Canadian business within the USA requires careful attention to legal obligations, from establishing your home state to incorporating and filing a beneficial ownership report. Meeting these requirements is essential for ensuring compliance and securing your business’s success in the American market. By understanding and adhering to these steps, you can confidently navigate the complexities of doing business in the U.S. and focus on growing your enterprise.

Ready to get started? Click here to file your BOIR in just a few short minutes. We make the process easy, fast, and secure so you can focus on what matters—your business.