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CORPORATE STRUCTURING AND BASIC TAX CONSIDERATIONS

CORPORATE STRUCTURING AND BASIC TAX CONSIDERATIONS. Can I use the same kind of entity to carry on my business in Canada?. federal corporation as well as provincial and territorial corporations no LLC equivalent

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CORPORATE STRUCTURING AND BASIC TAX CONSIDERATIONS

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  1. CORPORATE STRUCTURING AND BASIC TAX CONSIDERATIONS

  2. Can I use the same kind of entity to carry on my business in Canada? • federal corporation as well as provincial and territorial corporations • no LLC equivalent • unlimited liability company available in Nova Scotia and Alberta; proposed legislation in B.C.

  3. Do I need to have Canadian directors? • depends on jurisdiction • “resident Canadian” • unanimous shareholder declaration • director liability

  4. What are some of the taxes, government levies I need to think about if I am starting up a business? • federal and provincial income taxes • goods and services tax, harmonized sales taxes and retail sales taxes • Canada Pension Plan, employment insurance, employer health tax, workers’ compensation premiums

  5. Three tax considerations that might be a surprise • LLCs not entitled to the benefits of the Canada-U.S. tax treaty • no consolidated tax reporting in Canada • contributions to capital produce a different result than subscribing for shares

  6. How difficult is it to repatriate earnings from Canada? • withholding tax • return of capital • management and similar fees

  7. EMPLOYMENT MATTERS

  8. Can I do pre-employment tests and background checks? • human rights legislation prohibits drug testing • background checks are subject to compliance with privacy legislation • criminal records checks are permissible, but there are restrictions on the use of results

  9. Can I introduce background checks during employment? • employee consent cannot be coerced • requiring consent and use of results is subject to constructive dismissal issues • termination for failure to pass check would not be for cause

  10. What about human rights complaints? • prohibited grounds under provincial human rights legislation are different • generally, administrative tribunals have exclusive jurisdiction over such complaints • tribunals have broad powers, including reinstatement power

  11. How do I terminate employees in Canada? • high standard of just cause • without cause terminations governed by statute, common law and/or contract • statutory minimums must be complied with • reasonable notice of termination assessed on a case by case basis

  12. PRIVACY MATTERS

  13. How do privacy laws work in Canada? • PIPEDA: Federal legislation • need to consider provincial legislation in several provinces • generally, consent is required to collect, use and disclose personal information • consent must be informed – purpose for collection is disclosed

  14. SECURITIES REGULATION

  15. How is trading in securities regulated in Canada? • no federal securities regulation • regulated on a province by province basis • national instruments

  16. What do I need to do to permit employees in Canada to participate in our US stock plans? • no concept of incentive stock options • employees can receive capital gains treatment upon exercise if conditions met • broadly, trades to employees, executive officers, directors and consultants of the issuer and related entities (controlled subsidiaries) of the issuer will be exempt if participation is voluntary • resale over off-shore exchange assuming conditions met

  17. BUYING A BUSINESS

  18. What regulatory approvals do I need to think about? • Competition Act • Investment Canada Act • regulated industries

  19. Can I issue stock of the US parent without worrying about prospectus and registration requirements? • trade must be made in reliance on an exemption. Available exemptions include accredited investor, private issuer, business combination, take-over bid • resale over off-shore exchange assuming conditions met

  20. What obligations do I have to unionized and non-unionized employees if I buy a business in Canada? • share purchase: employment obligations unaffected by the transaction. Employment continues on the same terms • asset purchase – purchaser is successor employer under collective agreement • asset purchase – no obligation to offer employment to non-unionized employees

  21. LITIGATION MATTERS

  22. What is the litigation environment like in Canada? • fewer jury trials (no “right” in civil cases) • punitive damages rarely awarded • increased case management and mediation

  23. What’s different about class actions in Canada? • lower threshold for certification in Canada • no jury trials in class actions • more court control on plaintiff’s counsels fees

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