Best way to pass-through my income

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kingjulienNew Member
Topic author
Posts: 3
Joined: 8 Oct 2010

Best way to pass-through my income

Post Fri Oct 08, 2010 6:39 pm

My wife and children are dual citizens (Canadian / American) and I am a US citizen. We plan to move to BC in 2-3 years. My wife would sponsor me and I would be a resident of Canada until I can apply for my Candian citizenship (~3 years). I would like to get some direction on how to structure my income from my company. I am self employed (service industry), no employees (my wife helps me) and currently have a S-Corporation. At this time, all the income is salary (reasonable salary) and I pay FICA (15.3%) on that income. When I move to BC, I am going to keep my clients and run the company from Canada. What is the best way to structure my company to eliminate FICA and pay CPP? I know that living in Canada and being a US citizen requires me to file US taxes (would be exempt of paying them with the treaty) and paying taxes in Canada. My goal is to transfer the income generated in the USA and pay CPP, federal and provincial taxes in Canada. I need to have the business seperate for limited liability in the USA. Should I convert the S-Corp to an LLC or C-Corp? When I move, the income generated will be around 60K.
Last edited by kingjulien on Sun Oct 10, 2010 8:56 am, edited 1 time in total.
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scottconleyNew Member
Posts: 2
Joined: 22 Sep 2010

Re: Best way to pass-through my income

Post Sat Oct 09, 2010 11:54 am

I'm no expert, but I do know some people who have businesses and they don't collect an income but rather dividents from the corperation. Now they don't pay into the CPP or EI, but they only pay capital gains instead of income tax which is lower. This seems to work for them quite well.

As well with NAFTA, there should be provisions that allow a non-resident to run a corperation in the US from Canada. Go find a good tax/corperation lawyer.
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kingjulienNew Member
Topic author
Posts: 3
Joined: 8 Oct 2010

Re: Best way to pass-through my income

Post Sat Oct 09, 2010 2:52 pm

That's a bad idea. The IRS requires you to take a reasonable salary from your company first, then you can pay dividends if you are a C-Corp or bonus with S-Corp (no FICA). There would also be no capital gains as an active participant.

To someone qualified:

If I am a permanent resident of Canada (US Citizen) is it best to be self employed in Canada, establish a payroll for myself (CRA) and bill my US company for the work? The work will be completed in Canada and the only time I would be in the USA is to visit clients. I would file a US tax return, Canadian tax return, get the tax credit (treaty) and pay into Canadian Pension Plan. Is there a problem that my company in the USA is 100% owned by me (non-arms length)? What is a better limited liability structure in my situation (LLC vs. S-Corp) for less filing requirements?
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