The many benefits of working with your PEO Canada team is that we have developed a network of professionals and experts in the field to connect you with when it comes to developing business here in Canada. One of those professionals is Andrea Henry, a Business & Tax Lawyer with Vox Law in Toronto. I got the opportunity to sit down with her and discuss her 3 Top Tips when acquiring a Canadian Business.
1 – Due diligence – This is of the utmost importance, particularly when you are acquiring a Canadian company. It is essential that everything is properly set up, that corporate documents & taxes are correct and up to date. If you acquire a company that has an existing issue like unpaid taxes, you may now be responsible for that debt so it is very important to know what you are getting yourself into.
2- Think about the difference in culture with employee compensation – Canadian salaries tend to be a bit lower than their American counterparts, but benefits tend to be much better. Canadians have a Provincial health plan, but you will be able to offer matching Retirement Savings Plan and a Supplemental Benefits Plan. You may want to think about offering perks that you might not be offering to American employees because their salary is higher. That way, you can offset the differences in compensation between the same job for an American employee and Canadian employee.
3- Be mindful of the tax and liability consequences – Are you buying the assets of the company and folding it into your existing company or simply acquiring shares and allowing the corporation to carry on business as before? One of your main concerns is the Canada & US tax treaty which treats branches and subsidiaries differently. Will you operate as a branch or a subsidiary? If it is going to be a branch, you the foreign company will have direct liability for the Canadian operation. It may be a good idea to first establish a subsidiary in the US and then use the Canadian business as a branch of that subsidiary. If there is any liability out of the Canadian branch it is then limited to that subsidiary and does not impact the parent company.
Christina Ramalho / Business Development Consultant / PEO Canada