Tax Considerations for Canadians

[Oren K.]

Tax structure considerations for Canadians and US foreigners in general can be quite confusing. On the one hand, the mentor courses / boot camps / common advice (including many here on BP) is to just set up an LLC but when I've discussed it with professionals, they argue against it. I have never really understood why.

I recently was speaking with yet another specialist who put it to me this way;  

In Canada, companies are taxed the lowest and individuals the highest. In the US the reverse is true. So there is a miss-match and you end up paying more then you should.

This, if true (I think it is), now makes some sense. I also came across the following article which reviews why LLC as a structure is not the way to go.

http://www.moodysgartner.com/canadians-beware-united-states-limited-liability-companies-may-be-hazardous-to-your-tax-health/

I also found the following to be informative. It reviews a number of different structures with  the advantages / issues of each;

http://www.mondaq.com/canada/x/334102/Capital+Gains+Tax/Are+United+States+Limited+Liability+Limited+Partnerships+the+Holy+Grail

Adding anther layer of complexity is; how much are you generating in profits? If your holdings are small (i.e. a couple of SFH), the cost of setup companies, annual filings, etc. may simply not be worth the cost. Just pay the taxes and be done with it. On the other hand, if you are netting significant profits (e.g. 100K+ per year, but I really don't know where the cut off point is) in the US, the overhead may be worth cost / aggravation.

I am curious what structures Canadians are using and at the end of the day, what is the effective marginal rate they see. For every $1 of NOI, how much is sucked up by US / Cdn Taxes and is left in your pocket?

Also, if you take the time to read the articles, would you keep the same or consider making a change.