Can American Buyers Open an LLC in Canada?
The LLC arrangement for business ownership is not offered in Canada. A Canadian business can not be located in Canada (on paper) and run as an LLC. This is why many Canadian companies operate as LLPs (Limited Liability Partnership) instead of LLCs. This would be a topic for a British Columbia lawyer, not a Whistler realtor. An American Buyer may want to put their property in an LLC because they want to keep the property at arm’s length from litigation. In the United States, a limited liability company (LLC) is a business structure that offers limited liability protection and pass-through taxation. As with corporations, the LLC legally exists as a separate entity from its owners.
Holding Company
In Canada, a Holdco is an abbreviation for “holding company,” which is a firm that exercises control over other investments, such as stocks, bonds, other firms, and anything that has value. A Holdco earns money by collecting the dividends from the shares of firms in which it owns a controlling interest.
Mortgage and a Holdco
For Canadian mortgages in a company name, the company has to be registered in British Columbia. This is a Holding Company or Holdco. Everyone who is a shareholder of the Holdco personally guarantees the mortgage.
In Canada when you get a mortgage and own the property in a Holdco, then the owners are still personally guaranteeing it. Therefore there is no avoidance of that arm’s length unless there is something that your American lawyer has suggested you do.
Some Buyers have created an Independent Trust on the side, and have processed that through the Canadian Lawyer, but it still means that when it comes to the mortgage application, you are buying the property in a personal name and therefore personally guaranteeing it.
Insurance and a Holdco
When buying a property owned by a Holding Company, it is vital to check on the ability to obtain insurance. An insurance broker will be reluctant to insure your purchase because the holding company that is selling the property may have exposure to another commercial operation. Unfortunately, not all sellers disclose potential exposure.
Principal Residence
You may decide to move to Canada and become a Permanent Resident or Citizen of Canada, and make this Whistler property your permanent residence. If the property was in a Holdco, and after living in it for a few years, you sold the home, the sale proceeds would be subject to capital gains tax. Another scenario is to put this Whistler property in your name at the time of purchase and later become a Permanent Resident of Citizen of Canada. Then you move into this property and make it your primary residence for a few years. Then it means that when you sell your primary residence you would not be taxed on the capital gain.
Note: With a principal residence the owners have to live in a residence for more than a year before selling. Even after a year, you may need to persuade The Canada Revenue Agency (CRA) that you have a genuine reason to sell and are not property flipping. The CRA is watching for property flippers and taxing them accordingly.
It is always recommended that a non-resident of Canada speaks with a BC lawyer about their options prior to writing the offer.
Buying real estate in Whistler, whether ski-in/ski-out or not, is a smooth process when working with an experienced Whistler real estate agent who follows the rules. Everything in real estate, except for writing the contract and the negotiation is a process. Experienced realtor, and skilled negotiator, Marion Anderson will work with you directly from start to finish. No assistants are involved.
Marion Anderson Personal Real Estate Corporation
marion@WhistlerSkiinSkiout.com (604) 938-3885