As a cross-border law firm, we focus on establishing Canadian companies for US (and other foreign) companies; often these cross-border structures are driven by remote teams and/or a desire to utilize certain Canadian tax credits. Our aim with this post is to detail the most common cross-border structure we create for our US clients (especially startups) to establish a Canadian presence and move some of their team to Canada.

1.  Form Canadian Entity

First, a Canadian entity is formed, usually in the province where the company anticipates being based.  Where there are employees living in multiple provinces, often we will recommend incorporating in the province in which most employees are based.

While Canada has a unique federal corporate structure, we do not recommend incorporating federally as: (i) federal companies are foreign in all provinces, resulting in the need to register the company in each province in which it has a presence and incurring additional legal costs and administrative hassle; and (ii) the board of directors of a federal company must have at least 25% Canadian residents, or if less than 4 directors, 1 must be a Canadian resident, a requirement that may be a challenge for a foreign company to meet.

2.  Subsidiary or Affiliate

Second, we collaborate with our US client and their tax advisors on the best ownership structure for the Canadian company. Depending on the client’s needs and desire to utilize certain Canadian tax credits (a common ask for startups), the Canadian company may be a wholly-owned subsidiary or affiliate of the US company.

3.  Intercompany Agreement

Third, we draft an Intercompany Agreement to address the relationship between the US company and Canadian company.  While the two companies are related, they must treat one another on an arm’s length basis for tax purposes.

Effectively the Intercompany Agreement sees the US company paying Canadian company costs, with a % markup, in exchange for intellectual property created by Canadian employees being transferred back to the US company, as illustrated below:

4.  Employment Agreements

Finally, we re-draft (Canadian-ize) the US company’s US Employment Agreement template to comply with Canadian laws, which Employment Agreement would then be used by the Canadian company to hire. Through this unique approach (uncommon among law firms) we ensure that the Canadian employment agreement is as close as possible to the US company’s, allowing for substantial contractual consistency between jurisdictions.

If you’re looking to setup Canadian operations for your US company, please reach out to the Voyer Law team and we would be glad to discuss your options in-depth.

An EIN is a unique nine-digit number assigned to your company by the IRS and used for bank account opening, tax filing, hiring and reporting purposes. There are four main methods to obtain an EIN, each one posing its own complications for Canadian and foreign companies.

1. Online

The easiest approach, online, is unfortunately not available to most Canadian and foreign companies as it requires a personal US taxpayer ID number and a US-based address. If you use this method, we suggest you screenshot or print out the confirmation page as you will not receive any additional confirmation from the IRS of your EIN until they mail the EIN confirmation letter 3-6 weeks later.

2. Fax

This is sometimes the best method to use for Canadian and foreign based EIN filers. Simply fill out the SS-4 form and fax it to the correct number (depends on the state of incorporation). The processing time for fax applications can be anywhere from 4 business days to 3 weeks and sometimes requires a follow-up phone call in order to receive confirmation of the EIN. This is typically the preferred method as it does not require a US taxpayer ID number or US address for the filer.

3. Mail

This method is the simplest method, if you have the time. Simply fill out the SS-4 form and mail it in, taking 4-6 weeks before receiving the EIN in the mail. The biggest problem we see with our clients using this method is that, if there is a mistake in the filing, this method takes the longest to receive notice of the mistake and to subsequently correct.

4. Telephone

The IRS currently has a special EIN phone number for international businesses. While this method often results in the shortest processing time (sometimes the EIN is provided on the call), it usually doesn’t work for US-domiciled companies as this number is not meant for US-domiciled companies. US-domiciled companies are meant to call the US-domiciled business number, but this number doesn’t work outside the US.

There are ways to speed this process up, in addition to the above. If you need help applying for an EIN, please feel free to reach out to Voyer Law and we would be glad to assist with the speedy issuance of an EIN for your company.

If you are an Amazon seller, it is highly recommended you obtain trademark protection for your brand and enrol in the Amazon Brand Registry.  Amazon’s Brand Registry provides a variety of tools to monitor brand representation and prevent the sale of counterfeit goods on Amazon.

in order to take advantage of the Amazon Brand Registry you first must have:

1. A trademark with an active or pending registration;
2. A trademark registration number, or application number granted that the trademark is pending registration; and
3. A list of categories that the brand falls under.

The Amazon Brand Registry provides registered users with the ability to directly address counterfeit products. Those suspected of being bad actors are automatically removed from Amazon and the sale of these counterfeit products halted. Through Amazon’s ‘Counterfeit Crimes Unit’, the company additionally holds bad actors responsible through “building cases, undertaking investigations, and pursuing civil litigation”. Furthermore, trademarked brands registered under the Amazon Brand Registry are protected under ‘Project Zero’, which offers several benefits:

1. Suspected counterfeits are proactively blocked from being listed on Amazon;
2. Brand owners can directly remove products they think are counterfeits, which information is fed into Amazon’s algorithms to better catch counterfeits proactively in the future; and
3. Product serialization allows brand owners to apply a 2D code similar to QR codes on their products that uniquely identifies and authenticates the legitimacy of their brand.

There are also numerous ways that the Amazon Brand Registry helps registered merchants grow, including:

1. Access to prioritized product advertisements, displayed on headlines of search pages;
2. Customizable brand storefronts and the ability to specify in-depth product descriptions; and
3. Prioritized search results that are pushed by Amazon’s internal algorithm.

If you have a brand you want trademarked in Canada or the US, please feel free to contact one of our IP attorneys. We are licensed to practise in both Canada and the US and can assist new business owners obtain trademark protection for Amazon Brand Registry enrolment.

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:

• exercises “substantial control” over a reporting entity; or
• owns or controls 25% or more of the ownership interests (equity, stock, voting rights, convertible instruments or any other instrument, contract or other mechanism used to establish ownership) of a reporting entity.

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

• serves as a senior officer (for example, president, CEO, COO, CFO, general counsel and any other key officer position of a reporting entity);
• has authority over the appointment or removal of any senior officer or a majority of the board of directors; or
• directs, determines or has substantial influence over important decisions made by a reporting entity.

3.  What information needs to be provided?

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

• full legal name;
• date of birth;
• current address; and
• unique identifying number and an image of government-issued identification (US passport, state-issued driver’s license, or a foreign passport).

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.