Canada LLP - Tax Free and Highly Reputable Offshore Company
You like to do a lot of paperwork and pay a lot of taxes? Then please close this window. Today we will show you where you can incorporate, without stress, bureaucracy and taxes. This helped a lot of people to get rid of a life full of money related sorrows.
Tax-Free Income? Offshore? Is That Legal?
In the media they always draw the picture that offshore companies only exist for money laundering and tax fraud. Nasty corporations hide on small islands where they conduct their semi-legal deals under the protection of a tax haven. But is this really true?
Leaving aside the fact that the term tax haven implies the existence of a tax hell for entrepreneurs – *cough* Germany f.e. *cough* – it is only logical, for the benefit of both - the business and its customers, to pay as little tax as possible.
It is logical to consider picking a company's headquarters from a fiscal perspective. Doesn't the average person look to buy his weekly groceries from the supermarket instead of the gas station?
For nation states it is not only stupid but also economical blindness not to seek to become a tax haven too, as I have already expounded in a different blog post.
Offshore can be anything nowadays.
The classic island in the Caribbean is often significantly more expensive and looks dubious to many international business partners. Better therefore is the highly reputable form of company I will introduce to you in this blog post. The best thing is, contrary to common perception, it is completely legal if you do it correctly.
One of the biggest advantages is that you will be safe from what will soon come to get all the dodgy tax evaders. Have you already informed yourself about BEPS? Something big is coming! You should read about it, but don't get scared. With this structure you can be saved!
Form of the Company - Canadian LLP
My recommendation to you is a Limited Liability Partnership (LLP) in Canada. This legal structure includes the following benefits:
Very Good Reputation
Canada is a great industrial nation, a G7 member and internationally well respected. The country has the Common Law which is popular with many former British colonies. It is a fair, stable and reliable legal system. As I said, even your skeptical international customers and business partners will not have a problem with a Canadian company. There won't be anything standing in the way of your international business.
Suitable for Who?
As an international traveler, my blog posts usually focus on other nomads who are not registered for tax in Germany and travel tax-free throughout the world. But this will also be profitable for (online-)entrepreneurs who are based in, for example, Germany.
Admittedly the business owners might have to pay tax on their distributed Canadian profits in their residential country, but the bureaucracy can be significantly reduced. However you have to consider the fiscal rules of the German Foreign Transactions Tax Act and also, outside of Germany, countries might have laws regarding CFCs (Controlled Foreign Companies) which need to be considered.
But then because of the lack of reporting duties, the possible release from business tax accountants and other administrative expenditures, an offshore incorporation will be profitable – even for small businesses. For everyday business activities a branch office in Germany, for example, might already be enough.
So why not consider moving your headquarters to Canada – if only on paper?
This form of company has a so-called flow-through structure and that means the company doesn't need to pay taxes in Canada (even import/export or sales taxes). Only if the company carries out business within Canada tax will be charged. But if you are neither a Canadian nor live in Canada tax should be avoidable.
However, if your company plans to have customers in Canada someday a similar structure can be built in more expensive countries, like Panama, which would then be responsible for the Canadian customers. Yes, you heard it right, only distributed profits may be taxable at home if you aren't a perpetual traveler like me.
Since your company doesn't have to pay taxes in Canada you don't need to file a tax return. Goodbye tax accounting! There are some annual reports for LLPs but those are kept very simple and can be done by the agency.
The same is true for a registered office because a local address is mandatory. This is the official legal address for the government or possible litigants to contact. It is, however, not meant to be your business or mailing address.
With the agency to which I refer, you pay an invincible package price and get the registered office and the reporting for a low annual fee. More information can be found HERE. It definitely pays off to escape the domestic paper war and the enormous taxes.
I can support you in establishing your Canadian company so that the process is quick and any concerns you have can be dealt with, otherwise the process might take several weeks or months. You want to avoid the situation I experienced, where with a more expensive agency, after many e-mails and questions they just cancelled my order for no reason (A&P Intertrust)! Too bad when you then have to search for another agency and start the whole process again.
Learn from my experience and just contact me. The agency and I have experience particularly with digital nomads and crypto currency friends and can provide good advice. We can also save your own costly research. The agency works very fast. Of course, the biggest time factor in the founding process depends on you.
You must send all required documents to us or the agency via e-mail. Of course, we are at your disposal with advice and answers throughout the entire process. After submitting all documents for the registration the Canadian government takes about 3-5 weeks until the company officially exists.
No Minimum Capital
Whilst the company will be set up with an original capital of 1,000 US dollars this is just pro forma and only on paper. In practice you can pay out the capital later anyway, so it won't be relevant down the road.
As the name of the legal structure suggests, a Limited Liability Partnership has a restricted liability. Even though it is a partnership the structure is legally independent of you and is its own entity.
In addition, only 3 Canadian provinces provide a so-called "Full-Shield Limited Liability", which applies not only internally to the partners but also externally to third parties (British Columbia, New Brunswick and Saskatchewan). We offer an incorporation in British Columbia.
Several business areas
In general, there are no restrictions on the business activities of an LLP but of course, there are some laws, regulations and restricted professions in Canada. Details have to be checked with the Canadian legislator.
Generally, we can say: A normal digital nomad business, like for example an online sale of info products or drop shipping, won't be a problem as long as you don't ship military weapons or illegal drugs. Other business enterprises will suit the Canadian structure as well.
No Bank Account Required
No business bank account is necessary while and after establishing the company. Anyway, I'd rather recommend you using a modern service like TransferWise instead of opening an account with an overpriced bank that is probably regulated to death.
You can also find more information in another article. In addition, I know a workaround on how to get an EU bank account with many offshore companies . Just get in touch with me
Advantages Over the Canada LP
The Canadian LP is also very popular with online entrepreneurs. However, I deliberately rejected the Canada LP and chose the Canada LLP instead. Because the Limited Partnership is more expensive than a Limited Liability Partnership and does not allow a full limitation of liability for both partners.
By the way, I have learned from a lawyer that it's probably a myth that you can start the Canada LP with yourself as a partner. However, there are also contrary claims. It seems to depend on the province and your agency.
Although there may have been some establishments of partnerships with oneself, according to the Ontario Partnerships Act these constructs lose the character of a partnership and the flow-through structure becomes obsolete. This construct also loses tax exemption. All in all a very questionable and legally dangerous construct.
But without this advantage the LP wouldn't have any benefit whatsoever, which leads me to the only small challenge while establishing the Canada LLP.
The Only Catch
There is only one catch since nothing comes without a downside. As the term "partnership" implies at least 2 persons are required to form an LLP, although those persons include legal entities. But for all benefits the Canada LLP will give you might easily convince a friend to be your minor partner for the establishment of the company (he will get his small profit share).
Maybe you could consider your own spouse, your children, an already existing business partner or any other trustworthy person?
Perhaps you have another corporate entity which can work as a partner for the LLP. There are plenty of possibilities. Perhaps, we might be able to assist you finding a partner. Just ask us!
What Are You Waiting For?
If you find this interesting and you want to start your own business or move an existing company to Canada just consult me.
Read also how you earn tax-free income in Europe.
What do you think about a Canada LLP? Do you know some better or cheaper company structures anywhere else in the world? Then please write a comment down below!