Canada and US Taxation

Canadians have the right, just as US citizens, to form U.S. corporations and LLCs; act as officers and managers and have ownership in these entities.

An issue arises when it comes to tax time. Since Canada taxes its citizens on their worldwide income and the U.S. taxes the income earned in the U.S., the potential arises for both countries to tax the income of a Canadian citizen who earns money from a U.S. company.

To alleviate the "double tax" burden, there is a U.S.-Canadian tax treaty which attempts to proportion the taxes between the two countries whether it is a Canadian citizen earning money in the U.S. or a U.S. citizen earning money in Canada, so that only one tax will be paid on the income.

To obtain the details of this treaty go to www.irs.gov/faqs/faq13-1.html. This should provide you with substantial information regarding the tax obligations.

Of course, it is always best to solicit the counsel of an attorney or cpa when examining these issues.