Get my Free Guide: Entity Setup Playbook for Canadians in the U.S. at https://www.investingintheus.com
Canadian investors keep getting wrecked in the U.S. by one avoidable mistake—and I’m seeing it over and over. I’m back on the podcast to lay it out plainly: if you use a U.S. LLC as a Canadian, the IRS treats it as flow-through, but the CRA treats it like a corporation. That mismatch can trigger double taxation and, in extreme cases, push your effective tax over 90%. I’ve had countless messages from Canadians trying to unwind this after the fact—I don’t want that to be you.
There’s a second landmine: FIRPTA withholdings. If you’re classified as foreign when you sell, the IRS can hold 15% of the gross sale price—not your net—tying up your cash for a year or more. Try flipping at scale like that and you’re out of business on cash flow alone.
Here’s how I structure it. I use a Limited Partnership (LP) with a U.S. corporate General Partner (GP). The LP keeps taxation flow-through so the CRA and IRS align (no double tax), and the U.S. GP helps avoid being treated as foreign for FIRPTA purposes, so withholdings hit the return properly instead of your gross sale proceeds. It’s not the only way, but it’s the cleanest, most common path I’ve seen work for Canadians.
I’m grateful to everyone who stuck with the show while I was away—your messages meant a lot. If you want the step-by-step, I put everything I wish I’d known into a free Entity Setup Playbook for Canadians investing in the U.S. Grab it at investingintheus.com, take it to your accountant/lawyer, and use it to get set up right. Next episode, I’m debunking the biggest myths that keep Canadians out of the U.S. market. Stay tuned.
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