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Question

Hi Phil

Was referred to you by my US CPA, XXXX. I don’t think you know him, but he did find you online.

I have some important questions that I’m having a hard time finding answers to. Hopefully you’re the right guy to help.

My husband and I will be retiring to Canada once I sell my business. We are both dual citizens of the US and Canada.

I’m in the process of negotiating the sale of my business with a few parties and I want to make sure I get it right.

A little bit about my business:

I founded a biotech startup 15 years ago that’s matured to a point that I can’t continue to scale. I have under 10 employees and the company (a US LLC) owns and controls a few major bio patents. The value of the company to any prospective buyer is in these patents.

Assuming everything goes as planned the sale should be between $10,000,000 and $15,000,000 depending on sale terms.

My main questions is as follows. My US CPA has worked through with me the main US tax implications, however I may not be able to sell the LLC until I move to Canada. How bad, from a tax perspective, would it be if I sold the LLC when we moved to Canada. As you can imagine, selling for such high proceeds is going to require lots of time and due diligence for the buyer and considering how volatile things are in the US I really want to get back to Canada as soon as possible.

We will also want to reinvest the proceeds of the LLC sale for retirement and to buy a house. That being said we will also have capital available from our house sale in the US before we move. We also intend on working as consultants for 5 to 10 years before retirement.

Thank you for your time and let me know if I can clarify any of the information outlined above.

Thanks

XXXXXX

Answer

Hi XXXXX

Thanks for the email. Given the significance of the transactions we’ll certainly need to set some time on a call to work through the cross-border tax and financial planning details. But I some general comments may be useful:

All things being equal you’ll certainly want to sell the LLC before you enter Canada and before you become a Canadian tax resident. Owning and LLC as a Canadian tax resident does not work well and you’ll potentially be subject to double tax and significant amounts of tax compliance.

If you can sell the LLC before becoming a Canadian tax resident you’ll be able to develop a plan for bringing the capital over the border in a very efficient manner. Also, given you’ll be doing some consulting work we’ll want to review your best options for additional retirement savings depending on your needs into retirement and potential estate planning considerations.

If the LLC sale happens relatively soon before the move I would simply suggest bringing up the US dollars to Canada and then develop a plan for converting the USD to CAD as needed, or as part of a portfolio construction plan. On amounts this large you’ll want to ensure you find a good way to convert without paying too much of a foreign currency spread (we have some professionals that can help).

Once in Canada you’ll have a few options for investing your capital for retirement. Because you’re also a US citizen we’ll want to carefully review your options to ensure you don’t run into any tax or penalty traps.

Once again, considering you’re dealing with a sizable capital base to plan for I suggest we set out some time to review your options with a proper consultation.

Hope that helps and I look forward to our call.

Cheers

Phil