On January 1, 2024, the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) launched the online BOI E-Filing System and began accepting Beneficial Owner Information Reports pursuant to a new compliance regime under the Corporate Transparency Act.

1. Who needs to file?

Starting January 1, 2024, all non-exempt entities formed or registered to do business in the United States are required report Beneficial Owner Information (“BOI”) to FinCEN by January 1, 2025. This includes all corporations, LLCs, limited partnerships or similar entities created by filing a document with any US state, territory or Indian tribe as well as foreign non-US entities that are registered to do business with any US state, territory or Indian tribe.

2.  Who is a beneficial owner?

A beneficial owner is any individual who, directly or indirectly:

An individual exercises “substantial control” of a reporting entity if such individual:

3.  What information needs to be provided?

A reporting entity is required to provide the following information about Beneficial Owners:

4.  Who is exempt from the Beneficial Ownership Information filings?

There are 23 exemptions, which are listed in greater detail in the Small Entity Compliance Guide by FinCen.

One of the key exemptions is for “large operating companies” that: (1) employ 20 full time employees in the US; (2) has a physical presence in the US; and (3) filed federal income tax for the previous year demonstrating more than $5,000,000 in gross receipts or sales.

Other key exemptions are for inactive entities that are not engaged in active business and for subsidiaries of any other exempt entities.

5.  What does this mean for you?

If you are a beneficial owner of a US entity and not exempt from the filing requirements, failure to maintain and file a BOI Report by January 1, 2025 may result in fines up to $500 per day per violation and potential imprisonment.

Please reach out to the Voyer Law team to discuss your Beneficial Ownership Information filing requirements and whether your entity qualifies as an exempt entity.

Starting January 22, 2024, all federal corporations created under the Canada Business Corporations Act (CBCA) are required to file information regarding individuals with significant control (ISCs) with Corporations Canada.

1.  Who is an ISC?

According to the CBCA, an ISC is an individual (see: human person) that:

If a corporation’s shareholder is an entity (for example, a corporation, partnership, or trust), the individual(s) in control of such entity must be identified as ISCs.

Additionally, if multiple family members jointly own more than 25% of the shares of a corporation and one family member has sufficient influence over the other family members, such influential individual may be considered an ISC.

2.  What information will be filed?

The following information regarding ISCs must be filed with Corporations Canada:

Information that will be made public:

Information that will not be made public:

If an ISC is less than 18 years of age, information will not be made publicly available until such individual turns 18 years old.

You may file an application to not make the information about an ISC public if:

3.  Who is excluded from the ISC filing requirements?

Most federal corporations are required to comply with the new filing requirements, however, the following corporations are excluded:

4.  What does this mean for you?

If your corporation is federally incorporated and not exempt from the filing requirements, failure to maintain and file the ISC information may result in directors or officers facing penalties up to $1,000,000 or possible imprisonment, as well as potential fines to the corporation of up to $1,000,000 and involuntary dissolution.

Please reach out to the Voyer Law team to discuss your annual filing requirements and to maintain your corporation in good standing.

Canadians often ask us to incorporate LLCs.  In response, our answer is always (1) LLCs do not exist in Canada and are only available in the US; and (2) incorporating a LLC for a Canadian tax resident is usually a bad idea. In this blog post we’ll explain what a LLC is, why it’s a less than ideal structure for Canadians (mostly) and a few situations where a LLC may be beneficial for Canadians.

1.  What is a LLC?  A LLC, or Limited Liability Company, is a type of corporate structure available ONLY in the US. LLCs don’t have shareholders (instead they have members) or shares (instead they have membership interests, represented by either a percentage or units (or both)).

2.  How are LLCs taxed?  LLCs are, by default, treated as a partnership for US tax purposes, meaning that profits and losses flow through to the individual members.  Conversely, LLCs are treated as corporations for Canadian tax purposes.

3.  Why LLCs are bad for Canadians.  The ownership of a LLC membership interest by a Canadian is “bad” as LLC income is double taxed, without an available Canadian tax credit. First, LLC income is treated as partnership income for US tax purposes and taxed as such.  Second, LLC income is treated by CRA as dividend income and taxed again.  Problematically, no tax credit is available in Canada to negate such double taxation as the income types are not taxed the same, partnership distribution vs dividend, in addition to a timing issue.

4.  Is there any case for a LLC?  There are a few situations where LLCs may not result in double taxation, for example if a LLC is incorporated into a tax-oriented structure involving additional US entities to avoid direct Canadian ownership of the LLC.

As a general rule, direct ownership of a LLC by a Canadian tax resident is not recommended due to the double taxation that results. While there are options for a Canadian to take advantage of a LLC, such options involve complicated cross-border tax planning and require the assistance of experienced legal and tax professionals.

We frequently work with Canadian startups operating a U.S. (usually Delaware) company incorporated on their behalf by Stripe Atlas.  On the surface, Stripe’s assistance with incorporating this U.S. company seems convenient and an easy way to meet the U.S. entity requirements to use the Stripe payment processing platform.  However, a number of material issues are generated by Stripe when it incorporates a U.S. company on behalf of a Canadian startup.

Problem #1

It’s critical to understand that a U.S. company cannot operate out of Canada without registering as doing business in Canada (thus exposing the company to unnecessarily complicated Canadian/US dual taxation), which Stripe does not address in its standard documentation.

The common solution to this is to treat the U.S. company as a parent to (or as a subsidiary of) a new Canadian company and isolate each company’s tax obligations in their respective countries.

Problem #2

Your U.S. company formed by Stripe needs to transact with your Canadian company on an arm’s length basis, taking into account tax transfer pricing rules.  If you don’t engage in tax planning around the flow of cash and assets between the two companies, expect expensive tax problems in the future

These tax issues can typically be addressed through cross-border tax planning as documented in an Intercompany Agreement in which we address the flow of cash and assets between the two companies.  For example, in the agreement we can address which company books sales in which countries and how the cash from these sales moves between the companies.

While Stripe Atlas touts the ease and speed with which a U.S. company can be incorporated, it neglects the massive cross-border legal and accounting issues that forming a U.S. company abroad generates.  If these issues are understood before incorporating, Stripe Atlas can be a valuable tool but, if not understood and planned for, expect it to generate more problems than it solves for.