Can an LLC be formed in Canada?

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The LLC (Limited Liability Company) is a specific legal vehicle in the United States. The first state in the United States to enact legislation allowing the creation of an LLC was Wyoming in 1977. Since it is not incorporated, the LLC is to some extent similar to a sole proprietorship and apartnership. Moreover, from a tax point of view, it is the owners of the LLC who are taxed, on a personal level. However, like the corporation (corporation), the LLC provides limited liability to its owners. It is in this light that the LLC is said to be a hybrid entity, having characteristics of both the corporation and the partnership/sole proprietorship, which provides an interesting flexibility for entrepreneurs.

What about Canada? Can an LLC be formed north of the United States? Unfortunately, neither the Canadian provinces nor the federal government have enacted legislation that allows for the creation of an LLC. It is therefore necessary in Canada to incorporate a corporation in order to provide limited liability to its shareholders.

If an LLC is incorporated in the US by a Canadian for the purpose of carrying on business in Canada, it will be considered by the tax authorities to be a corporation. The profits of the LLC distributed to its owners will therefore be treated as dividends for tax purposes.

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