Business income from the States

[HIDStop]

Say you have an business (selling products, or a service) that has recently expanded into the US (from Canada). For whatever reason, you are not required to incorporate in the US to conduct your business. Now, lets say you are expecting to receive $100,000 + in revenue from the States alone, in the form of certified / cashiers cheques and bank drafts.

From what I have been told by by about 40% of the people asked, is that even if you have a certified / cashiers cheque or draft from a US bank, any Canadian bank will still hold the funds for 30 days or so.

What is the best way to work with this income?

-Incorporate in the States, and open up a US-based bank account that will be used for all US revenue?

-Open a US currency chequings / savings account with a Canadian bank (TD, etc.), have all your US cheques etc. sent here, and try and ask the bank to decrease the hold time to one week?

-Other?


Also - anyone have information on the tax implications of this scenario?
I will be speaking with an accountant later this week, this thread is to see if any beyonders have first hand experience.

I may be very far off with the above options, and any first hand experience / help is greatly appreciated.

Thanks in advance. :D

[roopi]

To avoid the 30 day hold you can shop around to different banks (I've seen as low as 15 day holds). Also wire transfer is another option to look at for payments.

[HIDStop]

Thanks for the input.

What would be the benifits of opening up an account with a US bank?

[blownz]

The hold totally depends on your relationship with your bank. I often deposit US cheques or money orders and never have a single day of hold.

[483hp]

The hold depends on your banks opinion of your account. If there is a hold, my guess is they need some more history on you and the quality of the cheques written by that particular party which will just take time.

I would not incorporate in the US unless you absolutely have to. You can operate as a Canadian corp and sell to the US, but you will have to look into the sales and use tax laws for each state separately since they all have their own rules. Adding a US Corp creates nexus and potentially you could also kiss your personal business capital gains deduction goodbye if you ever sell the business.

[483hp]

Originally posted by HIDStop
Thanks for the input.

What would be the benifits of opening up an account with a US bank?

There are very few. Some vendors including state tax departments only take cheques drawn on US banks. If you have a USD account at a Canadian bank, NP, just send a bank draft or wire transfer. The problem lies with a couple of US banks. When they get a USD cheque from a foreign bank, they will process it on collection, which means they send it back to the originating bank to have it certified before they credit the other party. This process can take weeks and the other side gets charged some ridiculous fees. So after a while, some companies just won't take USD cheques from non-US banks if they happen to have an account with one of these institutions because of the delay and the fees on every cheque. Again, not a big deal, just send a draft or wire. This minor inconvenience in a handful of situations will far outweigh the need to maintain and transfer money between two separate accounts at two separate banks.

[Lex350]

Originally posted by blownz
The hold totally depends on your relationship with your bank. I often deposit US cheques or money orders and never have a single day of hold.


Yup...same here. Granted my cheques aren't 100k but they have been over 30k and no hold.

If you don't have a person that you deal with on a regular basis at your bank set up a meeting with someone and start building that relationship....it pays off.

[HIDStop]

Cheers guys - I really appreciate the information.

Would any of your advice change if I told you that 90% of the time, the cheques / drafts would be from people that have not sent the company funds in the past?

[blownz]

^ doesn't matter to my bank. But if you end up depositing a bunch of cheques/drafts that go bad, it won't matter what kind of relationship you have with your bank, they are going to start holding.