Will U.S. Business Registration Minimize the Impact of Tariffs on My Business?

Ongoing talk of tariffs — and the uncertainty around their scope, scale and timing — has led some Canadian business owners to think strategically about how to reduce the impact tariffs may have on their business while protecting their cross-border operations.

One increasingly popular approach is to register a business in the U.S. Doing so may enable owners to tap into the depth of the U.S. marketplace while potentially mitigating some tariff implications. Here are ways to set up a U.S. business as a Canadian, and what to keep in mind as you establish operations south of the border.

First things first: Can Canadians set up a business in the U.S.?

The short answer is: yes. Canadians can legally set up and own a business in the U.S., and many do — you don’t need to be a U.S. resident or citizen. While there’s paperwork involved to comply with U.S. tax and immigration rules, the process is manageable with the right guidance.

Your business structure matters

There are two types of entities Canadians can register in the U.S.:

• Limited Liability Company (LLC)

• C-Corporation (C-Corp)

Both LLCs and C-Corps can be owned and operated by foreign nationals — including Canadians — without requiring U.S. residency.

Note: Canadians generally can’t set up a sole proprietorship unless they’re physically living and working in the U.S. with a valid visa. This is because sole proprietorships are tied directly to the individual for tax and legal purposes.

Setting up an LLC

As the name suggests, Limited Liability Companies (LLCs) offer limited liability, protecting personal assets from business debts or lawsuits. They’re flexible, with limited formalities and simpler tax filings than corporations. Canadians can typically form an LLC within about a week.

There is a catch with LLCs though: Canada doesn’t treat U.S. LLCs as “pass-through” entities for tax purposes, which may lead to double taxation — once in the U.S., and again in Canada. A cross-border tax advisor can help navigate this.

Setting up a corporation

C-Corps also offer limited liability but are treated as separate legal entities. This means they pay U.S. corporate taxes on profits, and shareholders are taxed again on dividends.

While this setup results in some double taxation, this structure may actually work in favour of Canadians because Canada recognizes U.S. C-Corps as corporations. The U.S.-Canada Tax Treaty comes into play as a result, allowing for a reduced withholding tax rate on dividends (typically 15 per cent) and providing a framework for claiming foreign tax credits in Canada.

This helps to reduce or offset the effects of double taxation on the Canadian side.

C-Corps may also be a better fit if you plan to raise investor capital in the U.S., as they’re the standard structure preferred by venture capitalists and institutional investors.

Common steps to registering a U.S. business

Registering a business in the U.S. isn’t complicated — there are simply a few steps to follow.

1. Choose a state

In the U.S., many rules and regulations — including rules around operating a business — are determined at the state level. So, choosing the state in which you plan to operate should be among your first steps. While you can set up your business in any U.S. state, there are a few that are favourites among Canadians:

• • Delaware: Delaware has business-friendly laws, no sales tax and no state income tax on non-residents. Also, its Court of Chancery is renowned for its expertise in corporate law and a big draw for many owners.

  • Wyoming: No state income tax, low fees and strong privacy protections make Wyoming a popular choice.

  • Florida: Another state with no income tax, Florida is popular given its large Canadian snowbird and expat community. This means the state has strong ties with Canadian banks and other business professionals, such as lawyers and accountants.

  • Texas: Texas is popular given its big economy and no personal income tax. It’s especially popular among tech or service businesses that want a base in the southern U.S.

2. Pick a business name

While you may already have a name for your business in Canada, you need to make sure it also works in the U.S. Start by searching the United States Patent and Trademark Office (USPTO) database, and check naming rules in the state you’re registering in. Some states require specific suffixes (like “LLC” or “Inc.”), or that the name reflects the nature of your business.

3. Apply for an EIN (Employer Identification Number)

Think of your EIN as your business number, the nine-digit number used to identify your business by the CRA (Canada Revenue Agency). It’s issued by the IRS (Internal Revenue Service) and used for filing taxes and opening a business bank account.

If your principal place of business is outside the U.S., you can’t use the online form — you’ll need to apply by phone, fax or mail.

4. Choose a registered agent

If you’re not physically doing business in the U.S., you need a registered agent — a person or company authorized to receive legal and official documents on behalf of your business.

Your registered agent must:

• Have a physical address in the state where your business is registered (not a P.O. Box)

• Be available during business hours

You can use a lawyer, friend or a professional registered agent service (common for Canadian business owners), which typically costs $50–$150/year.

The details: Taxes, permits and visas

Before you set up shop south of the border, it’s important to understand the regulatory and tax obligations that come with running a U.S. business. From filing taxes on both sides of the border to getting the right licenses, staying compliant may help you avoid surprises down the road.

Taxes

As a U.S. business owner, you’ll pay taxes in the U.S. on income earned there — and as a Canadian resident, you’ll still file with the CRA. Your tax liability will depend on whether you set up an LLC or C-Corp.

To avoid unnecessary double taxation or compliance issues, consult a cross-border tax advisor who understands both CRA and IRS regulations.

Permits and licenses

Most U.S. businesses require licenses or permits at the federal, state and local levels. The U.S. Small Business Administration offers a helpful tool that lists requirements based on your business type and location.

Visas

You don’t need a visa to own and operate a U.S. business remotely from Canada. However, if you want to work in the U.S., you’ll need the appropriate visa – operating a U.S. business doesn’t automatically mean you’re allowed to work there.

Here are some common visa options for Canadians:

• E-2 Treaty Investor Visa: For Canadians investing a “substantial” amount in a U.S. business

• TN Visa: For professionals working in specific occupations under NAFTA/USMCA

It’s worth talking to a U.S. immigration lawyer to determine which visa is the right fit for you, and how to apply.

Getting paid

The easiest way to make and receive payments in the U.S. is to open a U.S.-domiciled business bank account. This lets you use ACH (Automated Clearing House) — the standard U.S. system for electronic transfers (similar to direct deposit or pre-authorized payment).

Being set up to use ACH is important for a few reasons:

• ACH is fast and cost effective, but it only works with U.S.-domiciled accounts

• If your vendors or clients have to wire funds to Canada, they may perceive you as harder to do business with, potentially resulting in delays or higher fees

• Many U.S. vendors won’t send ACH payments to Canadian banks — another reason to have a U.S. account

The bottom line

Setting up a U.S. business can offer Canadians access to a larger customer base, smoother cross-border transactions and even help ease the burden of some tariff scenarios — depending on your industry and supply chain details.

While the paperwork and planning can seem daunting, the process is very doable. With the right structure and advice — particularly around tax, immigration and banking — Canadians can confidently expand their business footprint across the border.