Alberta Introduces Unlimited Liability Corporations

On May 17, 2005, the Business Corporations Act (Alberta) was amended to allow for the incorporation of unlimited liability corporations (ULCs). Prior to those amendments, ULCs in Canada could only be incorporated under the Companies Act (Nova Scotia).

For Canadian tax purposes, a ULC and its shareholders are taxed in the same manner as a traditional corporation and its shareholders. However, for U.S. tax purposes, a ULC can be treated as a "disregarded entity" if it has only one shareholder or as a partnership if it has two or more shareholders; alternatively, a company may elect to treat the ULC as a corporation for U.S. tax purposes. This flexibility can offer significant benefits for U.S. companies doing business in Canada and can be advantageous in U.S. tax planning in various circumstances, including cross-border share and asset acquisitions.