The Canadian Problem With Limited Liability Companies – A Self-Help Approach

The administrative position of Canada Revenue Agency (CRA) with respect to U.S. limited liability companies (LLCs) has created considerable consternation. CRA consistently repeated its position that LLCs that are treated as fiscally transparent for U.S. tax purposes will not be entitled to the benefits of the Canada-U.S. Tax Convention (the Convention) on the basis that they do not qualify as residents of the U.S. for purposes of the Convention even where all the members are U.S. residents. This position is in contrast to CRA’s "favourable" administrative position with respect to extending benefits to S corporations and generally looking through partnerships to the residency of the partners for purposes of applying a tax convention.