Beware the Limited Liability Company (LLC)
Canada Ltd. enters into an arrangement to “partner up” with a California retailer “California Corp.” California Corp. arranges for their California lawyer to form a California Limited Liability Company “California LLC”. The lawyer issues 50% ownership in California LLC to Canada Ltd. and 50% to California Corp. Canada Ltd. is then advised by a US CPA that Canadian individuals or corporations entering into an LLC may be subject to double taxation.
A US Corporation “US Corp.” is formed as a wholly owned subsidiary of Canada Ltd. US Corp assumes ownership of Canada Ltd.’s 50% interest in California LLC thus eliminating the double taxation issue.