Setting Up A Business in Canada vs The USA: Which Is Better?

If you’re considering setting up a business abroad and have your eye on North America, you might wonder whether it’s better to set up in Canada or The US.

Whilst both have growing economies and large populations, there are some big differences between them when it comes to regulations, taxes and costs of setting up a business.

However, one of the most important things to consider, especially now, are their political climates.

Political Stability

Any business owner wants to know that their business is protected politically.

Politicians have a huge influence over how a company can operate and grow.

Canada: Yesterday, it was announced that Justin Trudeau would step down after 9 years as Prime Minister. In his place comes former banker Mark Carney. Whilst the appointment of Carney will likely be welcomed by economists and business leaders who want strong financial leadership, his lack of political experience could be a red flag. This is particularly important considering the recent tariff war between the US and Canada.

USA: The US is currently under the leadership of Donald Trump, who is in the Oval Office for the second time. Trump’s ‘America First’ policies have meant he has imposed high taxes on countries like Mexico, Canada and China. This uncertainty makes it a tough climate for potential business owners to navigate, especially those who rely on imports, supply chain and a level of market stability.

Setting Up The Business

It’s worth understanding that in order to set up a country in either business, you will need the right visa. For Canada, this could include being sponsored by a Canadian VC or get their golden visa, which costs over CAD$200,000.

For the US, getting a visa has been historically difficult. However there are routes, including Donald Trump’s latest Gold Card which grants citizenship for $5M investment.

But let’s assume you have the rights to set up a business in both countries, here’s the comparison:

Canada: Registering a business in Canada is relatively easy. Business owners will have to choose between registering federally (across the country) or provincially (limited to one province). Once this has been decided the application takes a few days.

USA: The US is slightly more complicated because business incorporation differs by state. It’s worth looking at the options available and working out which one is best for your business – including local taxes as well as trade laws. Processing time can be fast, but deciding where to register is worth considering.

Taxes

Taxes vary a lot between one country and another and can have a huge impact on profitability.

Canada: In Canada, the Basic Part I Tax is 38% for businesses, but can be reduced to 28% after the federal tax discount. The country also has a general tax reduction scheme, lowering it to 15% for most businesses. However, small businesses are eligible for even more tax savings (Small Business Deduction), bringing it down to around 9%. On top of this, companies also have to pay provincial taxes, which are divided into lower and higher rate brackets depending on earnings.

USA: The Federal Corporate tax rate in the US stands at 21%. However, businesses also need to pay state business tax on top of this. Some states, for example Texas and Wyoming have no corporate income tax, making the total tax 21%. Others, like New York and California have added taxes, bringing up the overall amount. Because of this, deciding which state to operate in can have a big impact on overall corporate taxes.

Market Size and Workforce

The country you move to not only provides employees, but a domestic market too.

Canada: Canada has a highly educated population of just over 40 million, giving it a big domestic market. However, with such a large land area, Canada’s population is largely in hubs like Toronto, Montreal and Calgary.

USA: The USA is much larger with a population of over 340 million. In the US, 91.4% of Americans have a high school diploma (EDA), making it a large and skilled workforce to choose from.

Cost of Living

A high cost of living can make profitability more difficult.

Canada: Big cities like Toronto and Vancouver have a high cost of living, but Canada also has smaller cities that can make operations costs leaner.

USA: The USA is so large and costs vary so much between one place to another. For example, hubs like San Francisco and New York come with very high costs of living. Whereas states like Texas are more affordable.

Canada vs USA: Which One Is Better For Business?

When deciding which one is better – ultimately it depends on what your business does and what your goals are.

If you want to scale fast, the US might be a better choice. However if you want more political stability, Canada could be the one for you.

Either way, both options offer amazing access to global relationships and local economies that are sure to make your business a success.