Can a Canadian Own a Business in the US? The Tax Side

Yes. A Canadian can own a US business outright, whether it’s a US corporation, a US LLC, or a branch of a Canadian company. US tax law expects it: the IRS has a return built for foreign-owned US corporations, and it notes most states let LLC members include foreign entities. The decisions that matter are which vehicle you use and which returns follow from it. Owning a business is not the same as being allowed to work in it, and that part is an immigration question. For the full two-country comparison, start with our cross-border business structures guide.

Can a Canadian own a US company?

Yes. The federal tax rules are built with foreign owners in mind. The IRS says most states let LLC members include foreign entities, and Form 5472 exists for corporations that are 25% foreign-owned. What ownership doesn’t give you is a right to live or work in the US.

The IRS LLC page says: “Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities.” For corporations, the Form 5472 instructions cover “A 25% foreign-owned U.S. corporation (including a foreign-owned U.S. disregarded entity (DE)),” and define that as having “at least one direct or indirect 25% foreign shareholder at any time during the tax year.” A Canadian who owns the whole company is squarely inside that definition.

Tax status and immigration status are separate tracks. IRS Publication 519 makes the point about the tax ID itself: “An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U.S. law.” This page stays on the tax side; whether you can work in the business on a given visa is for an immigration lawyer.

Should a Canadian use a US LLC or a C corporation?

If you live in Canada, usually a C corporation. A US corporation pays its own 21% federal tax and the two countries agree it’s a corporation. A single-member LLC is ignored by the IRS, which taxes you on the profit as it’s earned, while the CRA calls the same LLC a corporation and taxes you again when money comes out.

The 21% rate is in IRC 11(b): “The amount of the tax imposed by subsection (a) shall be 21 percent of taxable income.” When the corporation pays you a dividend, the treaty caps US withholding at “15 per cent of the gross amount of the dividends” for an individual, under Article X(2)(b). Canada then allows a foreign tax credit under ITA 126(1) for “non-business-income tax paid by the taxpayer for the year to the government of a country other than Canada.”

The LLC side is the opposite. The IRS treats a one-member LLC as “an entity disregarded as separate from its owner, unless it files Form 8832,” so if the business is a US trade or business, its profit is your effectively connected income, and Publication 519 says that income “after allowable deductions, is taxed at graduated rates.” The CRA concluded in Income Tax Technical News No. 38 that US LLCs “are corporations for Canadian tax purposes.” That mismatch is why the LLC usually loses; the full mechanics are in why a US LLC is a tax trap for Canadian residents, and the Canadian-side forms are compared in LLC in Canada.

Structure	US return	Canadian treatment	Main trap
US C corporation you own personally	Form 1120 with Form 5472	A foreign corporation; dividends are foreign income with a credit for US withholding, plus a T1134 if it’s a foreign affiliate	Missing the 5472, a $25,000 penalty
US LLC you own personally	Form 1040-NR on its profit, plus a pro forma Form 1120 with Form 5472	Treated as a corporation	US tax now, Canadian tax later, credits that don’t line up
Canadian corporation with a US branch	Form 1120-F	Worldwide income; credit for US business-income tax	Branch profits tax once earnings pass the treaty exemption
Canadian corporation with a US subsidiary	Subsidiary files Form 1120 with Form 5472	The subsidiary is a foreign affiliate; T1134	Two corporate compliance stacks
You personally, no entity, selling into the US	Form 1040-NR if you have US business income	Business income on your T1	Assuming no US filing is ever needed

Subsidiary or branch for my Canadian company?

A subsidiary is a separate US corporation that files its own Form 1120; a branch is your Canadian company doing business in the US directly and filing Form 1120-F. A branch can owe the branch profits tax on earnings it doesn’t reinvest, capped at 5% by the treaty after a C$500,000 cumulative exemption.

The statute sets the branch tax at “30 percent of the dividend equivalent amount” (IRC 884(a)). The treaty’s Article X(6), with the rate as amended to 5 per cent, limits it and defines the taxable earnings as business profits minus losses, the taxes on those profits, profits reinvested in the US, and “Five hundred thousand Canadian dollars ($500,000) or its equivalent in United States currency,” shared among associated companies. A subsidiary paying a dividend to a Canadian parent owning at least 10% of the voting stock gets a 5% treaty rate under Article X(2)(a) as amended.

Which one fits turns on losses, liability and how you’ll move cash home. The trade-offs are worked through in US subsidiary vs branch for a Canadian company.

Do I owe US tax with no US office?

Generally not US federal income tax on business profits, if you have no permanent establishment in the US. The treaty makes business profits of a Canadian resident “taxable only in that State unless the resident carries on business in the other Contracting State through a permanent establishment.” The filings and state taxes are a separate question.

The core rule is Article VII(1). A permanent establishment is “a fixed place of business through which the business of a resident of a Contracting State is wholly or partly carried on” (Article V(1)), and it includes an office or branch. A person acting for you counts too if they have, “and habitually exercises” in the US, “an authority to conclude contracts in the name of the resident” (Article V(5)), unless they’re an agent of independent status. Article V(6) excludes a fixed place used solely for “storage, display or delivery of goods or merchandise belonging to the resident,” and services can create a PE under Article V(9) once someone is present for 183 days or more in a twelve-month period and other conditions are met.

Three limits on that protection:

• It’s for a Canadian resident doing business directly. A US corporation is a US taxpayer on its own profit at 21%. A US LLC owned by a Canadian resident generally can’t claim it either: Article IV(7)(a) treats an amount as “not to be paid to or derived by” a Canadian resident where the US sees it earned through an entity that Canada doesn’t treat as fiscally transparent, which is how the CRA treats a US LLC.
• It’s federal. The treaty’s list of covered US taxes is “the Federal income taxes imposed by the Internal Revenue Code” (Article II). States apply their own nexus rules, covered in when a Canadian business creates US tax nexus.
• Claiming it still means filing. The Form 1120-F instructions say a foreign corporation “should also file a protective return if it determines initially that it has no U.S. tax liability under the provisions of an applicable income tax treaty (for example, because its income is not attributable to a permanent establishment in the United States),” and warn that one that doesn’t file “will lose the right to take deductions and credits against effectively connected income.”

The Canadian rates in that example are from the CRA’s corporation tax rates page (“the net tax rate is 9%” for a CCPC claiming the small business deduction; Ontario’s lower rate is 3.2%). The credit for business-income tax is ITA 126(2), which covers “business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country.”

How does a Canadian get an EIN or ITIN?

A US entity you form gets an EIN from the IRS. The online tool needs a US principal place of business and the responsible party’s SSN or ITIN, so a Canadian-run business often applies by phone, fax or mail on Form SS-4. You personally need an ITIN when you must give a US tax number and can’t get an SSN.

The IRS EIN page says the online tool is for applicants whose “principal place of business is in the U.S. or U.S. territories” and who have “the responsible party’s Social Security number (SSN) or individual taxpayer ID number (ITIN),” and that you can’t use it if “Your principal place of business is outside the U.S. If so, apply by phone, fax or mail.” Publication 519 sets the ITIN trigger: “If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN).” For foreign entities the IRS’s taxpayer identification numbers page adds: “To expedite the issuance of an EIN for a foreign entity, please call 267-941-1099. This is not a toll-free call.” The ITIN is applied for on Form W-7, sent with the tax return it supports, per the IRS ITIN application page: “Complete Form 1040, U.S. Individual Income Tax Return or Form 1040-NR.” The step-by-step version is in the EIN guide for Canadian companies.

What US returns does a Canadian-owned business file?

It depends on the vehicle. A US corporation files Form 1120, plus Form 5472 for its reportable transactions with you, generally by the 15th day of the 4th month after year end. A Canadian company with US business files Form 1120-F. An individual with US business income files Form 1040-NR. A US LLC owned by one Canadian still files a pro forma 1120 with Form 5472.

The due dates and the penalty, each from the current instructions:

• Form 1120: “a corporation must file its income tax return by the 15th day of the 4th month after the end of its tax year” (Form 1120 instructions).
• Form 5472: filed “as an attachment to the reporting corporation’s income tax return by the due date (including extensions) of that return.” “A penalty of $25,000 will be assessed on any reporting corporation that fails to file Form 5472 when due,” with another $25,000 for each 30-day period the failure continues more than 90 days after IRS notice (Form 5472 instructions).
• Foreign-owned single-member LLC: “it will now be required to file a pro forma Form 1120, U.S. Corporation Income Tax Return, with Form 5472 attached.”
• Form 1120-F: by the 15th day of the 4th month if the foreign corporation “maintains an office or place of business in the United States,” and by the 15th day of the 6th month if it doesn’t (Form 1120-F instructions).
• Form 1040-NR: without US wages subject to withholding, “file Form 1040-NR by the 15th day of the 6th month after your tax year ends. A return for the 2025 calendar year is due by June 15, 2026” (Form 1040-NR instructions).

On the Canadian side, owning a US corporation that’s your foreign affiliate brings a T1134, due “within 10 months after the end of the year or period” under ITA 233.4(4). The full starting checklist, including bank accounts and state registration, is in Canadian starting a business in the US.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.