One 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.
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.