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3 Mistakes US Companies Make When Expanding into Canada

Posted by Anna Mastrandrea

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Apr 20, 2018 9:00:00 AM

3-Mistakes-US-Companies-Make-When-Expanding-into-Canada-compressorOne of the most common steps a US business takes when looking to expand is to move into the Canadian market. Many US companies find it’s easier to do business with their neighbours to the north. This is partly legislative as the two countries have made many trade deals designed to increase the ease of doing business with each other. After all, the US is Canada’s largest trading partner

Download our free guide on what US companies need to know about paying  employees in Canada.

It’s also a geographic issue as Canada and the US share the world’s largest unguarded border. Moving people and products into Canada is easier than getting them to the UK or China. Finally, it’s also easy for US businesses to expand into Canada because of the shared culture of the two countries. 

Even if most US companies find it easy to move into Canada, there are also many stumbling blocks. Here are a few of the common mistakes US companies make when expanding into Canada.

1. Choosing the Wrong Business Structure

How are you going to set up your business in Canada? Will you be a branch office or a subsidiary? Are you an unlimited liability corporation (ULC)? Deciding how to structure your business is an important consideration when expanding into Canada. 

Each different structure has its pros and cons. You’ll need to carefully consider which structure fits your business best. Tax implications are just one of the considerations when expanding into Canada. Others include the structure of your board of directors and more. 

Choosing the wrong business structure can hurt your Canadian operations and your US business too. Select wisely. If you’re not sure, do some research or get advice from the experts.

2. Setting Up in the Wrong Province

Most people think of Canada as a monolithic whole. While the federal government does create country-wide policies, many areas of legislation fall to the provinces. Each has different laws about taxation, business structure, and employment. 

A business in Ontario can’t do business in Alberta without some additional paperwork, so this is another area of consideration for US businesses expanding into Canada. Where are your clients or customers located? Where are your facilities and employees located? 

While you can get around this issue by filing additional paperwork to operate in additional provinces, if you know your operations will be centred in one place, be sure to set up there.

3. Not Partnering with a PEO

You’re probably aware of how complex tax withholdings and regulations can be in the US. You have to deal with the IRS at the federal level, and then there are individual state laws. Employment legislation is another pain point.

Canada’s much the same way. There’s the federal level of taxation and employment legislation, but you’ll also need to pay particular attention to the provincial statutes on these subjects. Your Ontario employees can’t be treated the same was as your Quebec employees, and your Alberta employees are different yet again.

Partnering with a Canadian PEO can untangle the web of employment legislation and taxation in Canada. Unfortunately, it’s a step few American companies consider when they’re expanding into Canada. Whether they believe they can handle it on their own or they don’t realize the intricacies, they wait until the first CRA penalty arrives.

Save yourself the trouble and partner with a Canadian PEO from the beginning.

Expansion Can Be Easier

These are just a few of the major stumbling blocks American firms encounter when they come north of the border. If you’re thinking about expanding into Canada, you can make it easier. Talk to the experts, do your research, and carefully consider every aspect of your Canadian operations. Once you’re set up correctly, you’ll find it’s smooth sailing.

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Topics: Business Expansion

5 Reasons It’s Easier Than You Thought to Expand to Canada

Posted by Karen McMullen

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Apr 18, 2018 9:00:00 AM

5-Reasons-Its-Easier-Than-You-Thought-to-Expand-to-Canada-compressorExpanding into Canada is a fairly common step for American companies. After all, Canada is the USA’s closest neighbour. The two share the world’s longest land border, and they’re close in culture.

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know 

Nonetheless, it can still be difficult to expand to Canada, just as it is to move operations to any foreign country. You’ll need to carefully consider things like business structure and employment legislation. 

It’s probably easier than you think to expand into Canada, however. Here are just a few of the reasons why.

1. Geographic Proximity

As mentioned, Canada and the US share the world’s longest land border. The two are literally next-door neighbours. This geographic proximity has long been both a source of tension and a source of strength for both nations. 

It makes it particularly easy to ship products or people to Canada. You can pick a water route, such as through the Great Lakes, or an overland route into Alberta or BC. Sending someone to Vancouver for a business meeting or to oversee operations at your facility in Quebec isn’t difficult. Similarly, getting products back to the US isn’t difficult either.

2. Shared Culture

One of the reasons Canada is the first stop for expanding US businesses is because of the geographic proximity. It’s easy to expand into Canada. The logistics of getting things to and from is much easier than shipping to and from Australia or China. 

Canadians and Americans also have something of a shared culture. While both are quite unique and distinctive, they have more in common than Canadians and Brazilians or Americans and Kenyans. 

This shared culture often makes it simple for American companies to expand into Canada. Sometimes, there’s already Canadian demand for the products or services your business offers. It also means doing business with Canadian firms is a little easier. American employees often have to be reminded of the cultural norms of others, such as Japanese business people. You’re less likely to run into trouble when dealing with Canadians.

3. Trade Legislation

NAFTA has been on everyone’s minds as the three signatories attempt to revise and rework the deal. The proceedings have been contentious and full of plenty of stops and starts. What befalls the free trade agreement between the US, Canada, and Mexico remains to be seen.

NAFTA creates free trade between the US and Canada, lowering or eliminating tariffs on many products. It also eases the immigration of certain classes of professional employees. Other trade agreements are designed to bolster relations between Canada and the US. The US is Canada’s largest trading partner after all.

Other agreements include taxation treaties to avoid double-taxing citizens of either nation who earn income in the other. The advantages of expanding to Canada are numerous.

4. Incentives for Foreign Business

Another reason it can be easier than you thought to expand to Canada is that there are actually incentives for foreign investment. While Canadians are still concerned about their homegrown business, they also look to the world stage to find partners and investors. Very often, they find those partners among US businesses.

Incentives can include favourable taxation arrangements and business structures designed to help US companies succeed in Canada.

5. Help from Canadian PEOs

As easy as it can be to expand into Canada, there are still going to be challenges for any business deciding to move over the border. Navigating legislation around taxation and employment can be tricky.

You can make it easier by getting help from a knowledgeable Canadian PEO. Their expert advice can help you administer payroll to your Canadian employees and even get you started on the path to picking the right business structure for your business operations.

If expanding into Canada is your next move, discover just how easy it can be.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

4 Types of Business Structures to Consider When Expanding into Canada

Posted by Corinne Camara

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Apr 16, 2018 9:00:00 AM

4-Types-of-Business-Structures-to-Consider-When-Expanding-into-Canada-compressorYou’re growing yet again, and this time you’re moving across borders. Your business is expanding into Canada. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

Before you move north of the border, however, you’ll need to carefully consider the structure you should give your Canadian operations. Fortunately, there are a number of different ways to structure a business expanding into Canada. Unfortunately, so much choice makes it more difficult to choose a structure. 

All business structures come with pros and cons. You’ll need to do some research, talk to the experts, and determine which structure really suits the needs of your business. Here are a few types of business structures you should consider when you’re expanding into Canada.

1. Branch Office

A branch office is one of the structures a business expanding into Canada needs to consider. This structure is often one of the easier ones to set up, but it has its drawbacks. 

Setting up as a branch office means you continue to operate as a foreign firm within Canada. Your Canadian operations are taxed differently, although not always advantageously. Why would anyone set up as a branch office in Canada, especially if there are other, better options available

The answer lies in the idea that the branch office remains closer to the parent company. It is not independent, so all income flows back to head office. This can create an advantageous tax situation in some cases. It also provides other benefits, such as not needing to place a certain number of Canadians on the board of directors.

2. Subsidiary

A subsidiary is another popular business structure for businesses expanding into Canada. In fact, the subsidiary is the most common way for foreign firms to structure their Canadian operations. Why? 

The answer is easy to see. Subsidiaries create a wholly Canadian entity operating in Canada. This has two major advantages. The first is favourable taxation. The Canadian subsidiary is treated as a Canadian business and so it’s taxed like one. 

The other major advantage is that this type of business structure insulates the parent company. If you’re unsure about your Canadian operation’s profitability, it might be better to structure as a subsidiary. This way, your company is insulated from debts and losses the Canadian subsidiary incurs. 

The major drawback of this structure consists of the rules around the structure of your board of directors. You must place so many Canadians on your board to qualify as a subsidiary.

3. ULC

An unlimited liability corporation is a specific type of subsidiary available for businesses setting up in BC, Alberta, and Nova Scotia.

Not only does this structure do away with the “Canadian content” requirements for your board of directors, but it also has additional tax advantages. It allows flow-through of both profit and loss from the Canadian subsidiary, something most subsidiary structures don’t allow. This gives you the same advantages of the branch office while also securing the benefits of a subsidiary.

If you’re setting up shop in BC, Alberta, or Nova Scotia, you may want to consider a ULC for your business structure.

4. Limited Partnership

This structure option is best if you have a Canadian partner already waiting in the wings. Instead of going it alone, you can create a limited partnership with a Canadian business and merge your operations to expand your business into the Canadian market. This is a tax-friendly option, which is one reason it’s favoured by American firms.

If you’re still not sure, get some advice from the experts. Choosing how to structure your operations in Canada isn’t a decision to be made lightly. Consider these four options and do more research before you make your move.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

What International Companies Need to Know about Severance in Canada

Posted by Stacey Duggan

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Apr 6, 2018 9:00:00 AM

What-International-Companies-Need-to-Know-about-Severance-in-Canada-compressor.jpgAs an international company operating in Canada, you’re well aware of the differences in rules. Payroll is most definitely not the same, and the business taxes you face are also quite different. There may be different regulations for the products or services you offer. 

Download our free guide on what US companies need to know about paying  employees in Canada.

This is also true when it comes to employment legislation and the rules around hiring employees, compensating them for vacation time and leaves, and so much more. Letting an employee go might be another issue. While you hoped never to face it, you now need to terminate someone’s employment with your company. 

Severance may be one thing you’re wondering about. How exactly is it handled in Canada?

When Must You Provide Severance?

The first question you’ll need to ask is when you’ll need to provide severance pay. There are quite a few scenarios. 

If you dismiss or stop employing the person, they may be entitled to severance pay. If you’ve gone bankrupt or declared insolvency, you cease to employ the person and they’ll be entitled to severance. If you give employees an ultimatum and they decide to resign as a result, they’re entitled to severance. 

If you lay off an employee for more than 35 weeks in a 52-week period, their employment is considered terminated. If you decide to close an office or discontinue business at a location, you’re considered to have laid off the employee.

A Mix of Notice and Severance

If you give an employee written notice of their termination and the employee then resigns with two weeks’ notice, you may be required to pay them severance. This situation would come up if the employee was still entitled to termination pay beyond those two weeks.

Other Reasons to Provide Severance

These aren’t the only scenarios when you may be required to or even want to provide severance to employees. If you need to lay off employees, you might offer a severance package immediately. Employees who opted to take it would be free to seek out other employment.

A restructuring activity may also put severance on the table. Some employees may not like the new terms you’re offering them and, since they’re not the terms they were hired under, they have legal grounds to refuse. You can offer these employees severance.

What Are the Rules?

Like virtually everything else in Canada, severance rules differ from province to province. If you operate in Ontario, you’ll need to look at the rules for severance in Ontario. Someone operating in BC will need to look at that province’s legislation.

To fully understand severance pay, you’ll need to look at the employment legislation for each province you operate in.

Compensation for Long Service

Generally speaking, severance pay is awarded to employees who have been with your company for some time. They may be senior employees or they may have a long-service track record. Often, they have seniority in the firm and they may even have specific skill sets and expertise. Severance is designed to compensate them for the loss of employment.

As a result, you may wish to offer severance in other circumstances than those required by law. You’re only bound to provide severance in the cases specified by the law, however.

How Do You Calculate It?

Each province lays out its own rules for calculating severance pay. In Ontario, you add together the number of years of employment plus the number of months of an incomplete year. Take the sum and multiply it by the employee’s regular weekly wages. This will give you their weekly severance pay for a maximum of 26 weeks.

Different provinces use different formulations, of course, so severance pay for an employee in BC can’t be calculated the same way.

If you’re concerned about severance pay or need to calculate what it will cost you, talk to a Canadian EOR and payroll service provider. They can walk you through the steps and help you navigate the nuances.

12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

Everything You Need to Know about a TN 1 Visa

Posted by Ray Gonder

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Apr 4, 2018 9:00:00 AM

Everything-You-Need-to-Know-about-a-TN-1-Visa-compressor.jpgAre you a Canadian who has a job offer in the US or is looking to work in the States? Perhaps you’re an American employer who may need to expand your search for the perfect candidate internationally. Maybe you already have the perfect person lined up! You just need to get the proper paperwork filed. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

No matter your situation, you may be wondering what kind of visa you’ll need to get and how you’d go about obtaining one. Is the TN 1 visa right for you?

What Is a TN1 Visa?

Under the North American Free Trade Agreement (NAFTA), Mexico, Canada, and the US can share employees. Obviously, there are concerns about people moving across borders illegally and working in places they’re not qualified to work. Not only is this problematic for state control of citizenship and citizenship benefits, it also exposes workers to exploitative situations. As a result, it can come with hefty fines for employers. 

NAFTA has provisions to make it easier to share employees, especially highly qualified professionals. NAFTA recognizes the right person to hire may not always live in the US, so companies may need to look beyond borders to find the person they need for the job. If that person is in Mexico or Canada, they may qualify for a TN1 Visa. 

The TN1 Visa is designed to allow a freer flow of highly qualified employees in a number of different areas of employment. Engineers, scientists, and others may qualify.

Who Is Eligible?

To be eligible for a TN1 Visa, the employee must be a citizen of Mexico or Canada. They must also work in one of the specified areas and be able to show their credentials in this area. If the job falls outside of NAFTA’s list or the person doesn’t have the qualifications, they won’t be able to obtain a TN1 visa. 

It’s important to note the TN1 visa is not an immigration visa, meaning the person cannot stay indefinitely in the United States or obtain citizenship. That makes the TN1 a great choice for temporary assignments. A TN1 can be issued for one to three years.

How Do You Get One?

For Canadian citizens, the TN1 visa is relatively easy to obtain. If you have a job offer in one of the qualifying fields and you’re a qualified person, you can bring the required paperwork to the border. You don’t need to visit an embassy first, like you would with other visas.

What paperwork do you need to bring? There’s a form, of course. You’ll also need to bring a letter from your employer, outlining the job offer. You’ll also need proof of your educational background. Your employer’s letter should include some of that proof.

Still Not Sure?

Getting a TN1 visa can seem relatively simple, but you want to be sure you’re doing things correctly.

A great starting place is to look at the many resources online. Start with official governments sites, like the ones offered by the US government. If you’re still having difficulty or you’re still not certain you’re doing things correctly, there are other resources.

You might also want to talk to an immigration lawyer or an employment lawyer, particularly if they have a background in NAFTA professionals or international employment. Another good option is a PEO. Since they deal with cross-border employment situations on a regular basis, they can provide guidance.

Getting a TN1 visa doesn’t need to be stressful. In fact, it can be quite easy! Talk to the professionals today and discover if the TN1 visa is right for your situation.

What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

Expand Your Business with an Employer of Record in Canada

Posted by Karen McMullen

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Apr 2, 2018 9:00:00 AM

Expand-Your-Business-with-an-Employer-of-Record-in-Canada-compressor.jpgHave you been noticing increased demand for your product or service in the Canadian market? Maybe it’s time to expand your business. Becoming a truly international business is a milestone for any company. 

Setting up shop in Canada can be somewhat tricky. You’ll need to decide what business structure to use and you’ll have to consider the tax implications. You’ll also need to look carefully at employment law and payroll taxes. 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

You can simplify your Canadian expansion. All you need to do is team up with a Canadian employer of record.

What Does an EOR Do?

You may have heard the term employer of record, or EOR, used before. It’s very common for international businesses to employ their services when it comes to managing the workforce on the other side of the border. 

You’re likely most familiar with the rules and regulations surrounding employment and payroll in your home country. Your HR staff likely feels the same way. They don’t know the ins and outs of the Canadian payroll regimen. They may not be sure how to go about hiring people or letting them go

This can cause all kinds of complications when it comes to managing your business. You may believe you’re in perfect compliance with the law when you’re actually not. 

An employer of record is here to help navigate these trials in your business.

Simplifying Payroll

The employer of record’s primary function is to administer payroll to your Canadian employees and contractors. This can simplify payroll quite significantly, especially in the Canadian context. After all, payroll rules can vary somewhat from province to province. You’ll calculate vacation pay differently in Quebec and Saskatchewan. 

If you’re not familiar with the Canadian rules or the law in the province you’re operating in, you could run into trouble with the Canada Revenue Agency. The EOR helps you avoid penalties and audits by ensuring your compliance.

Managing Your Workforce

Another huge difference between your home country and Canada, or even between various Canadian provinces, is employment legislation. You may want to hire a temporary employee, but your definition varies wildly from the definition under law in Nova Scotia or Alberta.

The EOR ensures your employees are categorized correctly. They’ll also take a look at your hiring practices and align them with the standards of the province(s) you’re operating in. Next, they’ll also help you in the event it’s necessary to let someone go.

Again, the employer of record helps you maintain compliance with the law in all of these activities.

Good Advice

If you’re just thinking about crossing the border into Canada for the first time, you have many decisions to make. How will you pay your employees? Will they be contractors or full-time employees? How will you set up the business? Will you operate as a branch office or a subsidiary? The questions go on and on.

An employer of record can give you some advice on many of these points. While you may want to consult with others, including legal professionals, before you make the final move, discussing tax implications with an EOR is a good idea.

Where Can You Find One?

Looking for an employer of record in Canada? There are many different ones to choose from. Do some research beforehand and get quotes for services before you decide. Be sure to evaluate each company on their offerings, as well as their customer service. You want to be sure you’re getting the best partner.

An employer of record can make the monumental move of expanding internationally into Canada much easier. If you haven’t considered it yet, talk to an EOR today and discover how they can help.

What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

Are You Managing Employees from Abroad? Don’t Make These 4 Mistakes

Posted by Karen McMullen

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Mar 28, 2018 9:00:00 AM

Are_You_Managing_Employees_from_Abroad_Don_t_Make_These_4_Mistakes.jpgExpanding your business operations into a new country involves plenty of hard work and some tough decisions. How are you going to set up your business operations? Will you hire employees or contractors? What are the tax obligations?

Once the dust has settled, however, you’ll begin to relax into your new role. In most cases, this will include managing employees from abroad. It’s easy to make mistakes when you’re trying to manage your international employees from a distance. Watch out for these four mistakes, and you’ll have clear sailing ahead.

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know


1. You Don’t Communicate

“Out of sight, out of mind” can be a real problem when it comes to managing employees who aren’t in the office on a day-to-day basis.

It’s easy to just “forget” about these employees, sometimes because they’re so far away and sometimes because you’re preoccupied with things closer to home. Nonetheless, you should be making a concerted effort to communicate with them on a regular basis. You should keep lines of communication open, even when things seem to be going well.

Not communicating causes all sorts of problems. There may be a problem you don’t know about until it’s out of hand. Employees may not know what they’re doing, how to complete a task, or even what’s expected of them. Communication is key.


2. You Don’t Lay out Expectations

Even if you communicate on a frequent basis and communicate well, you may not have laid out clear expectations for your employees abroad. Maybe you felt they had a good grasp on their role. Maybe you thought their job description was enough guidance to go on.

Employees, no matter where in the world they’re located, benefit from having your expectations laid out for them. When you make things crystal clear, employees know exactly what they must do to succeed and how their success will be measured. As a result, they can raise the bar on their performance.


3. You Don’t Know the Law

Did you hire someone as a full-time employee and now want to let them go? You’ll need to watch your step to ensure you’re compliant with employment legislation in their jurisdiction. Payroll compliance is likely also different, as are rules for leaves, holidays, and vacations.

Ignoring laws will not only upset your employees, but it could land you in more hot water than you bargained for. If you’re unsure of something, study up. You can always ask advice too, from legal counsel or from a service provider expert such as an employer of record.

If you’re unsure, make sure you find out! Being compliant is much easier and more cost-effective than trying to ask forgiveness for a transgression later on.


4. You Don’t Account for Cultural Differences

You may think of cultural and language differences as something that comes into play when you decide to open up shop in a foreign country halfway around the world. These factors are still at work when you hire employees in places like Canada. Even though Canada is very similar to the US, it is still a different country.

Some of the cultural norms will be reflected in the legal framework you’re operating in. For example, in Canada, bilingualism is legislated, meaning language support for French and English needs to be offered. Subtler cultural differences may not be obvious at first, but they do come into play.

You’ll want to recognize and acknowledge these cultural differences. You might even notice different patterns in the ways your employees communicate and prefer to be communicated with. Keep this in mind and be accommodating as much as possible. You and your employees will be happier for it.


What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

Should I Set up as a Foreign Entity or a ULC?

Posted by Corinne Camara

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Mar 26, 2018 9:00:00 AM

Should_I_Set_up_as_a_Foreign_Entity_or_a_ULC.jpgWhen you move your business operations into Canada, you have several options for how to structure the business. For example, you can choose to set up as a branch office or a subsidiary.

Another choice you may need to make is whether you structure your operations as a foreign entity or an unlimited liability corporation (ULC). It’s not an easy choice to make; both options have their advantages and disadvantages. The structure you choose will likely depend on your unique business needs.

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Still, you need to know a bit about each in order to even decide which option is right for your business.


What Is a ULC?

An unlimited liability corporation (ULC) is one format your business can take if you decide to incorporate as a subsidiary in a Canadian province. Note that the ULC option is only available in a handful of provinces, including BC, Alberta, and Nova Scotia. Other provinces may soon follow suit.

As the name implies, the ULC has unlimited liability. This means if your business has to close down, such as it being liquidated or going into bankruptcy, current and even former shareholders can be liable for the company debts.

The ULC structure, however, allows you to flow profits and losses through to shareholders. Shareholders can use losses to reduce their incomes and thus reduce the issue of double-taxation on their income. It’s a great way for US companies to invest in Canadian assets as well since it doesn’t trigger certain US income taxation rules.


What Is a Foreign Entity?

A foreign entity is a company that was incorporated outside of Canada but is registered to do business in Canada. If you want to operate Canada-wide, you’ll need to set up in each individual territory and province.

Depending on where you choose to operate, you may have different options for how to incorporate and register. For example, you could set up as a foreign limited company or a foreign limited liability company. If you decide to set up a branch office, you’ll be registering as a foreign entity.

There are some advantages to setting up as a foreign entity, such as tax incentives that subsidiaries like ULCs don’t receive because they’re incorporated in Canada.


Which Is Better?

Now for the heart of the question. Which is better, a foreign entity or a ULC?

The answer is it depends on what you want. If you’re hoping to protect your business from the Canadian venture’s risks, you may wish to form a subsidiary. A ULC doesn’t provide the same insulation from risks since profits and losses can be flowed through, although the ULC has other perks.

The main advantages of setting up as a foreign entity are related to taxation. Both ULCs and foreign entities also have lower requirements for Canadian representation on your board of directions than other subsidiary forms.


Consider Carefully

Different forms of business registration come with different requirements under Canadian law. You’ll want to pay particular attention to the Canada Revenue Agency’s rules and regulations around each, particularly where taxation is concerned.

Other things to consider include requirements and obligations under legislation such as the Investment Canada Act and the Competition Act. Your products or services may also be regulated, either at the federal or provincial level. You’ll need to be sure you can meet the legal requirements to operate as a particular kind of business in any of the provinces.

Most American firms find it most beneficial to set up as a subsidiary. ULCs are a type of subsidiary with some distinct advantages, so they’re becoming more popular where they’re available. That said, registering as a foreign entity can also make sense.

It all depends on your business and your needs. Before you decide which option is “best” for your business, be sure to discuss with the experts.


12 Things an American Company Looking to Hire a Worker in Canada Needs to Know

Topics: Business Expansion

Should I Set up as a Canadian Branch or Subsidiary?

Posted by Anna Mastrandrea

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Mar 12, 2018 9:00:00 AM

Should-I-Set-up-as-a-Canadian-Branch-or-Subsidiary---compressor.jpgIf your company is moving across the border into Canada, you may be wondering what structure is the correct choice for your business. Should you be a Canadian subsidiary? Or should you structure the business as a Canadian branch? 

12 Things an American Company Looking to Pay a Worker In Canada Needs to Know

Both options have their advantages and their drawbacks. Carefully consider the following points as you weigh your options. One choice may be the clear winner for your business.

A Canadian Branch

A branch office is considered an offshoot of the parent company. This means the parent company still controls and is responsible for the branch office. To create a branch, your company would submit a branch registration to each province you propose to operate in. For example, if you wanted to open branch offices in Ontario, British Columbia, and Alberta, you’d submit a registration to each of those provincial governments. 

Different provinces have different rules for registrations, and you’ll also want to be aware of the differences in legal frameworks between provinces. Employment law is quite different between Quebec and Ontario, for example, so be sure to consider the implications and advantages of operating in each province.

A Canadian Subsidiary

A subsidiary is the other popular option for structuring operations when a foreign business looks to expand to Canada. A subsidiary differs from a branch in that it is not considered an extension of the parent company. 

Instead, a subsidiary is a separate corporation controlled by the parent company. Rather than being an extension of your operations, the Canadian subsidiary becomes its own company.

To create a subsidiary, you would incorporate in a province of your choice. You can also incorporate federally. If the subsidiary isn’t incorporated federally, you can choose to apply for extra-provincial registrations so you can operate in multiple provinces.

Which Is the Right Option?

The “right” option for each business will depend on your business and its unique needs. Currently, the most popular option is to incorporate as a subsidiary, although branch offices offer their own unique advantages.

The primary reason most foreign companies incorporate their Canadian operations as subsidiaries is that it insulates the two companies. If the parent company has many liabilities, operating a Canadian subsidiary protects the new Canadian operation from the parent company’s risks. Similarly, if the Canadian operation is a risky venture, the parent company is insulated.

Considering Tax Implications

Risks and liabilities aren’t the only things you need to take into consideration as you choose between operating as a Canadian branch office or a Canadian subsidiary. Each option has tax implications.

Branch offices may provide a more favourable tax position for some companies. In the case of branch offices, only the branch’s Canadian earnings are subject to Canadian business taxes. Normally, these taxes end up somewhere around the 25 percent mark.

With a subsidiary, however, your company’s worldwide revenue becomes taxable within Canada. There are reductions available to avoid double taxation.

There is also a difference in the way losses are handled. Generally speaking, a parent company cannot deduct losses from a Canadian subsidiary. Both subsidiaries and branches can carry their losses back three years and seven years forward.

Carefully Weigh Your Options

As mentioned above, there is no “right” answer. A Canadian subsidiary isn’t inherently better than a Canadian branch office, and vice versa. You need to carefully consider your business’s position and its needs.

The tax implications and legal impacts of choosing a subsidiary or a branch office structure for your business are more intricate than what’s outlined here. You should consult with experts before you make a decision about how to structure your business operations in Canada.

With careful consideration, however, you can make the right choice for your business.

What US Companies Need to Know about Paying Employees in Canada

Topics: Business Expansion

How to Establish a Canadian Administrative Presence

Posted by Shannon Dowdall

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Feb 9, 2018 9:00:00 AM

How_to_Establish_a_Canadian_Administrative_Presence-1.jpgDoes your business operate in Canada? Are you thinking about expanding into Canada? No matter which situation more accurately describes you, you’ve probably thought about how you’ll handle payroll, taxes, compliance, and more.

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For foreign businesses expanding beyond their borders into Canada, the administrative side of the business can become quite complex. You’re likely used to the processes and rules at home, but you may find the Canadian regime more than a little confusing.

It can be confusing even for Canadian-owned and operated businesses! Whether you’re growing and need some administrative guidance or you’re expanding into a new province, you may find yourself faced with administrative questions you can’t answer.

There’s an easy way to shore up your Canadian administrative presence in any of these situations: team up with a Canadian employer of record.


You Need Help

Whether you’re an American business coming north of the border or a Canadian start-up facing fierce growth, the reality is you can likely use a helping hand when it comes to managing your administrative activities, such as payroll and other HR activities.

Foreign entities may find themselves somewhat baffled by the differences in Canadian payroll rules and the complexity of the provincial legal system.

As mentioned, the solution is to team up with a Canadian employer of record (EOR). They can help you manage your administrative activities with ease and grace.

The next question on your mind is probably, “How do I find one?”


Do Your Homework

The first thing you should do is look up a few Canadian EORs. There are many out there, so you’ll want to do some careful research. Not all EORs are created equal. Some have more experience and expertise. Some will have better track records than others.

Ask for recommendations or visit reputable third parties to find some recommendations. Narrow your list of potential providers. Research what they offer and how their plans fit your needs. Finally, you’ll want to compare prices and service offerings.


Ask for a Quote

The next thing on your list is to get quotes from the EORs on your shortlist of names. While you want to compare pricing options, getting quotes also has another purpose. You can begin to evaluate each potential provider’s customer service!

If a provider doesn’t get back to you right away or they don’t seem interested, their attitude is unlikely to improve. Set high standards and you’ll be sure to find the best Canadian EOR to establish your Canadian administrative presence.


Working Together

Once you’ve decided on a provider, you can sign a contract and begin working together. This has many advantages for you as a business.

First and foremost, you get the expertise of a team of people who deal with the Canadian payroll and legislative framework every day. If you have questions, they can answer them. You don’t need to worry about the intricacies of vacation time legislation in Ontario versus Quebec. As the legal employer of your employees, the EOR will handle all these employment situations.

It will also simplify the process of remitting your payroll taxes to the Canada Revenue Agency and paying your employees. It can help you avoid audits, as you can be sure your compliance will be up to date.


Why You Need an Administrative Presence in Canada

Even with these benefits in mind, you may wonder why you need an administrative presence in Canada. After all, you have systems in place at home, and your talented staff is more than up to the task of learning about the Canadian system.

Having an administrative presence in Canada is a necessity to do business in the Great White North. And EOR can make the process a breeze, so you can worry about strategy instead of administration.


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Topics: Business Expansion

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