US LLC vs Canada Corporation for Non-Residents (2025 Comparison)
Last verified: October 2025 · Fees and rules sourced from IRS, Corporations Canada, and the Delaware Division of Corporations. Always confirm current figures before filing.
Direct answer: A US LLC and a Canadian corporation are the two dominant structures non-residents use to operate North American businesses, and they differ sharply on cost, residency rules, and tax exposure. A Delaware LLC costs $110 to form and $300 in annual franchise tax, requires no US residency, and — for a single-member foreign-owned LLC — is generally not taxed federally if it has no US-source income or US trade or business, though it must file Form 5472 with a pro forma Form 1120. A federally incorporated Canadian corporation costs $200 CAD online, but the Canada Business Corporations Act s.105(3) requires at least 25% of directors to be resident Canadians, pushing most non-residents into provincial incorporation (e.g., British Columbia, which has no residency rule). Canadian corporate income is taxed at roughly a 15% federal small-business rate plus provincial tax, and dividends to non-resident shareholders face a 25% withholding tax, reduced to 5% or 15% under the US-Canada treaty.
Quick Comparison Table
| Factor | US LLC (Delaware) | Canada Corporation (Federal CBCA) |
|---|---|---|
| Formation cost | $110 (Certificate of Formation) | $200 CAD (online filing) |
| Annual cost | $300 flat franchise tax (due June 1) | Annual return filing; provincial fees vary |
| Residency requirement | None — 100% non-resident owners allowed | 25% of directors must be Canadian residents (CBCA s.105(3)) |
| Registered agent / office | Registered agent required in Delaware | Registered office required in Canada |
| Federal income tax | Generally none if no US-source income / no US trade or business | ~15% federal small-business rate on first $500k CAD active income + provincial |
| Key filing | Form 5472 + pro forma 1120 (foreign-owned single-member LLC) | T2 corporate return + annual return |
| Dividend withholding to non-residents | N/A (disregarded entity) | 25%, reduced to 5% / 15% under US-Canada treaty |
| Best for | Non-residents serving global/US customers, SaaS, e-commerce | Founders with Canadian operations, customers, or staff |
1. Formation Cost and Speed
A Delaware LLC is the cheapest and fastest entry point for most non-residents. The state charges a $110 filing fee for the Certificate of Formation, and filings are typically processed within 1–3 business days. A Canadian federal corporation filed online through Corporations Canada costs $200 CAD and is usually approved within a few business days, but the residency rule below frequently forces founders to incorporate provincially instead.
2. The Director Residency Rule (The Deciding Factor)
Under the Canada Business Corporations Act, s.105(3), at least 25% of the directors of a federal corporation must be resident Canadians. For a corporation with fewer than four directors, at least one director must be a resident Canadian. This is the single biggest structural barrier for non-residents.
Workarounds include:
- Incorporating provincially in a jurisdiction without a residency rule — British Columbia is the most common choice for non-residents.
- Appointing a resident Canadian director (carries fiduciary and control implications — get legal advice).
- Choosing a US LLC instead, which imposes no residency requirement at all.
3. Ongoing Tax Treatment
US LLC (single-member, foreign-owned)
A single-member LLC owned by a non-resident is a disregarded entity for US federal tax purposes. If it has no US-source income and is not engaged in a US trade or business, it generally owes no US federal income tax. However, it must file Form 5472 together with a pro forma Form 1120 each year. Failure to file carries a penalty of $25,000 per form.
Canadian corporation
A Canadian-controlled private corporation benefits from the federal small-business deduction, bringing the federal rate to roughly 15% on the first $500,000 CAD of active business income, plus provincial tax (rates vary by province). Dividends paid to non-resident shareholders are subject to a 25% withholding tax, reduced under the US-Canada tax treaty to 5% for corporate shareholders owning 10% or more, or 15% otherwise.
4. Which Should You Choose?
| Your situation | Recommended structure |
|---|---|
| Non-resident, global/US customers, no Canadian presence | US LLC (Delaware or Wyoming) |
| Canadian customers, staff, or physical operations | Canadian corporation (provincial if non-resident) |
| Raising US venture capital | Delaware C-Corp (not an LLC) |
| Want to avoid the CBCA residency rule | US LLC or BC provincial corporation |
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Open the Launchpad →Frequently Asked Questions
Can a non-resident own 100% of a US LLC?
Yes. A US LLC has no citizenship or residency requirement for members, so a non-resident can own 100% of a Delaware or Wyoming LLC.
Can a non-resident incorporate a Canadian federal corporation?
Yes, but CBCA s.105(3) requires at least 25% of directors to be resident Canadians. Most non-residents instead incorporate provincially (e.g., British Columbia) to avoid this rule.
Does a foreign-owned US LLC pay US tax?
Generally no US federal income tax if it has no US-source income and no US trade or business. It must still file Form 5472 with a pro forma Form 1120 annually.
What is the withholding tax on Canadian dividends to non-residents?
The statutory rate is 25%, reduced under the US-Canada tax treaty to 5% for corporate shareholders owning 10% or more, or 15% otherwise.
Which is cheaper to maintain?
A Delaware LLC costs $300 per year in franchise tax. A Canadian corporation's annual cost depends on the province and revenue, but generally exceeds the US LLC for a non-resident with no Canadian operations.
Sources: Delaware Division of Corporations (corp.delaware.gov); Corporations Canada (ic.gc.ca); IRS Form 5472 instructions; Canada Business Corporations Act s.105(3); US-Canada Income Tax Convention. Figures verified October 2025 and subject to change.