I am being approached to become part of a ULC in Canada. Does anyone here have any general information about being part of a Canadian Corporation?

From the Canada perspective, the ULC is treated as a normal corporation. From the US perspective, the ULC is treated as a flow through entity. As a US resident, there will only be one taxable event that will pass through to my personal US tax return.

The purpose of the new company is to further develop a technology that I currently own.

TIA

How is there only one US taxable event? These types of hybrid entities can get complicated with DCL rules and the GILTI regime. You'll need to understand the structure of the entities underneath the ULC and the activity expected.

The honest answer is that I don't know if there is only one taxable event. That is why I am asking. A lawyer is Canada is recommending this structure. My CPA has no experience with something like this.


The ULC will be formed to develop a product. There will be no entities underneath the ULC. The ULC will take seed money to develop a product. Then, that product will be sold or leased to interested parties. Profits from the ULC should be distributed to the owners as wages or distributions.

I do not know much about DCL or GILTI and how those will affect my stateside tax obligations.

It sounds like you will have ongoing taxable activity for US purposes. Even if you were able to check the entity closed and make it a CFC, you may have a GILTI inclusion. There may be a reason to have it flow through but you may want to look at owning the ULC through some other type of entity.

This kind of thing can get hairy, and I've seen Canadian attorneys really mess this up when it comes to the US tax consequences. I would find a decent size tax firm and try to pay for a few hours of advice/discussion. You'll need someone that understands it to be able to do your own taxes going forward. Hate to say it, but you may be outgrowing your current CPA.

Thanks Pin. Seems like solid advice. I will reach out to a bigger firm that has prepared my taxes years ago.