Expanding Your Canadian Business into the U.S.: Tax, Financing, and Immigration Considerations

As Canadian businesses scale, the U.S. market often becomes the natural next step for growth. With access to a much larger customer base, competitive talent, and broader capital markets, expanding into the United States presents a tremendous opportunity. However, it also introduces a host of complexities — particularly around tax compliance, corporate structuring, financing strategy, and immigration law.

At Prasad & Company LLP, we regularly assist Canadian companies navigating cross-border expansion. Here are the key issues to plan for before launching operations south of the border.

1. Tax Challenges: Cross-Border Structuring and Compliance

Expanding into the U.S. means entering a different — and often more aggressive — tax environment. Key considerations include:

Choosing the Right Entity Structure

• Should your U.S. presence be a branch, a subsidiary, or a limited liability company (LLC)?
• While LLCs are popular for U.S.-based entrepreneurs due to their pass-through taxation and flexible structure, they often create significant tax issues for Canadian owners. LLCs are treated as corporations for Canadian tax purposes, but as partnerships or disregarded entities in the U.S. — leading to potential double taxation and complex reporting.
• S Corporations, while tax-efficient for U.S. shareholders, are generally not a viable option for Canadian owners due to eligibility restrictions and negative Canadian tax treatment.
• C Corporations or Limited Partnerships (LPs) are often better suited to Canadian-controlled U.S. operations. They allow for cleaner tax reporting, better alignment with Canadian tax rules, and improved planning around dividend repatriation and capital structuring.

We help evaluate and establish optimal cross-border structures that balance liability protection, tax efficiency, and operational flexibility, while avoiding common pitfalls for Canadian residents.

Permanent Establishment and Tax Exposure

• The Canada-U.S. Tax Treaty outlines when a Canadian business becomes a “permanent establishment” in the U.S.
• Once triggered, the U.S. will tax the profits attributable to the U.S. operations, and compliance obligations arise (federal and potentially state-level taxes).

Transfer Pricing

• Intercompany transactions between the Canadian parent and U.S. entity must follow arm’s-length pricing rules.
• Transfer pricing documentation must be maintained and may require a comprehensive analysis.

We prepare robust transfer pricing documentation and ensure compliance with IRS standards.

State Tax and Sales Tax Complexity

• In addition to federal taxes, the U.S. has complex and varying state-level corporate income taxes and sales tax regimes.

Our advisors provide a jurisdictional review to determine your U.S. tax footprint and assist with multi-state compliance planning.

2. Corporate Financing & Banking Challenges

Access to U.S. Capital Markets

• Expanding into the U.S. may require access to U.S. financing. However, lenders often require U.S.-based collateral or guarantees.

Cross-Border Banking Infrastructure

• Opening U.S. bank accounts and establishing credit facilities can be time-consuming without a U.S. presence or tax ID.

Repatriation of Profits

• Once the U.S. operations are profitable, businesses must consider the tax-efficient repatriation of profits back to Canada.
• Options include intercompany dividends, royalties, management fees, or interest payments, each with different tax implications under the Treaty.

We collaborate with lenders and financial institutions to streamline financing and banking processes, while designing tax-smart repatriation strategies.

3. Immigration and Workforce Mobility

Visas for Key Personnel

• Moving executives, managers, or specialized staff to support U.S. expansion requires careful immigration planning.
• Common visa options include:
  • L-1A (intra-company transferee – executives and managers)
  • L-1B (specialized knowledge)
  • TN visas (under NAFTA/USMCA for certain professions)

Entity and Business Requirements for Visa Eligibility

• The business must be properly incorporated in both countries and demonstrate active operations and a qualifying relationship (e.g., parent-subsidiary).

Immigration Timelines and Processing

• Applications can take weeks or months to process and require detailed supporting documentation.

We work closely with immigration law professionals to ensure visa applications are strategically planned and supported by appropriate corporate documentation.

Planning Early is Key

U.S. expansion is a significant leap forward—but the groundwork must be carefully laid. Tax exposure, financing strategy, and personnel mobility all require coordinated planning. Delays or missteps can lead to tax inefficiencies, regulatory issues, or missed market opportunities.

At Prasad & Company LLP, we offer integrated tax, advisory, and cross-border planning services to Canadian businesses expanding into the U.S. Whether you are setting up a U.S. entity, transferring staff, or preparing to raise capital, we help ensure a smooth, compliant, and tax-efficient expansion.

Let’s Build Your U.S. Expansion Plan

If your business is considering growth into the U.S., now is the time to start the conversation. Contact us today to develop a clear roadmap that will support your operational, financial, and legal goals while reducing risk and preserving value.