The US market offers enormous opportunities for foreign investors and ambitious business owners. Canadian or other foreign businesses may operate in the US through a variety of legal forms, including self-proprietorships, corporations, general and limited partnerships, limited liability companies (LLCs) and US branches. A choice of a business structure is often influenced by tax and non-tax reasons, which may include legal, fiscal, and financial considerations.
The US rules regarding the formation, operation and dissolution of a business are generally defined by the state rather than federal law. This often increases the administrative burden and the tax cost for non-US businesses as bi-lateral tax treaty protection designed to mitigate taxation at the federal level may not be recognized at the state level. Considering that there are 50 states and the District of Columbia with their own income, property and sales tax provisions and practices often with a lack of integration amongst them, careful attention to each specific rule and each appropriate jurisdiction may be required.
A foreign investor doing business or expanding into the US should have advanced knowledge to properly plan and execute their investment strategy as well as the willingness to face rigorous US tax obligations.
To read more about this topic see What is a Treaty-Based Return and Why Shall I File It?