INBOUND INVESTMENTS INTO CANADA should not be made with US LLCs, according to two Canadian lawyers.

The lawyers, with the firm Ladner Downs in Vancouver, write that Canada treats LLCs (limited liability companies) as corporations regardless of their US tax classification, and LLCs will not be considered residents for purposes of the US-Canadian tax treaty. The combination of these two factors means that business profits earned in Canada by a US LLC will not receive treaty protection and thus will be taxed fully in Canada, and payments of dividends, interest and royalties from Canada to a US LLC will be subject to full withholding tax of 25%.