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How Canadian Ecommerce Brands Save Thousands With a USLLC · Honest Ecommerce

• speaker-0: You set up a USLC. Now people at this point are I can I can I can hear the question ringing that which state do I open it? There's like fifty states. Ninety five percent of my clients go with Wyoming because it's simple, it ⁓ keeps your identity protected. So you do have that anonymity. And it's simple to kind of file taxes for every year as well, and it's a tax free state. speaker-1: Honest ECommerce is a weekly podcast where we interview direct-to-consumer brand founders and leaders to find out what it takes to start, grow, and scale an online business today. Hey everybody, welcome back to another episode of Honest E-Commerce. Today I'm welcoming to the show ⁓ Salman CPA. Sal, welcome to the show. speaker-0: Hey, how you doing? Pleasure to be here. speaker-1: I'm excited to have you. I like the crossover here. You're more on the YouTubes and I'm more on the podcast land. One hundred percent. ⁓ but we're gonna we're gonna do both. We're gonna end up on each other's shows. So I'm very excited about that. For sure. So at the top, I just want to make sure we shout it out. I mentioned you're on YouTube. ⁓ what do I search on YouTube to find your content? Yeah. speaker-0: Thank you. So Sal accounting CPA. That's it. So the th first three letters of my name, accounting CPA. speaker-1: And it's also the name of your business, Sal Accounting. You guys are a one-stop shop for Canadian e-commerce brands selling into the USA. Such an interesting niche. Their team takes care of like the tax stuff on both sides of the border and helps out with the books. ⁓ how did you end up in this weird little cross section of e-commerce? speaker-0: Very good question. So I had a small Amazon store that that kind of ⁓ it was alright. It was not doing great. But I realized my my expertise lied in what I studied, which is accounting and tax and all of that stuff. So I didn't continue with that. I sp part it based on my partner, but then I started salary counting CPA, which is basically helping e commerce store owners realize that there's there's tax obligations on the Canadian side. But then there's tax obligation on the US side. Now, on the US side, they might not know it, but there's there's savings when you open. For example, if you've got a Shopify store, you're selling to the US, which majority of Canadians or majority of brands overall, a bunch of like a ton of their sales are coming from the US anyway. Now, if you're a Shopify store, you're gonna get charged a fee, which is a 1.5%, or if you're in the plus plan, 1.25% Shopify fee. For international payouts. So your bank account and your company and everything is outside the United States. Shopify is going charge you extra on top of their two, three percent fee to pay the money out to you. People don't realize that just by having a USLC, you can basically avoid that fee. So because we also do cross-border, which is US Canada tax, we realize that we can shop Shopify sellers are the one niche that we can really help out. Given my expertise in cross-border, my expertise in e-com. Bring the everything in one under one roof and offer that to to folks. And I can talk about a bunch of those things, but I don't want to d derail the conversation, so I'll flip it over to you. speaker-1: No, no, absolutely, Sal. That's fantastic. So what you discovered through running your own business is kind of ⁓ not necessarily a cheat code, but people love buzzwords, right? You know, it's like ⁓ you know, how to instantly save one percent year over year, which is just do some upfront work. And you kind of already mentioned it, is it's setting up a USLLC. And then I'm sure there's a lot more to it than that. But like what I guess first and foremost, at what size does something like this, as far as like and I'm and I'm saying let's maybe just for the rest of the conversation, we're talking in US dollars. Just to set the stage on that, I think that will make things a little bit so like at what size of an e-commerce business? And then I want to clarify too, is it are you only working with Shopify brands or just like kind of e-commerce in general? But like what size business does looking into getting a US entity set up really make sense? speaker-0: Hundred percent. Thank you for asking that question because that's very pertinent. So first thing, the first precursor to it this is you wanna have before you even get to size of revenue, the f you either have to have one of these two things that necessitate you opening a USLC. So one is that you either on the plus plan, and why I say on the plus plan, because then you would have on the plus plan you can have multiple entities from multiple countries. So you can have a USLC set up on your sh US Shopify store. And you can have a Canadian entity on your Canadian Shopify store, which means that you don't get charged the 1.5% fee on in either country because you have two entities, each of them are local to that country. And so Shopify doesn't charge you for disbursing the amounts in your local currency. So that's one thing, either in the plus plan. If you're not in the plus plan, then you need to have at least 50% of your sales, more than 50% of your sales in the United States. Because what happens is if you're not on the plus plan, you can only have one company set up on your Shopify store. So if you have if you have only one company, you obviously want that one company to be the one that w in that's in the country where you have the most sales. If you have most of your sales from the US, then it makes sense to put the USLC on the Shopify store. And then all of the other countries, ⁓ your sales from those countries, would then get charged that fee. But what happens with most Canadians is that 70, 80, maybe even ninety, ninety-five percent of their sales are from the US. So it makes sense for them to have the show ⁓ the USLC on the store and not have a Canadian company. Right. So at the starting at the starting when people start out, they put in the Canadian company and then they realize they're getting hit with that fee again and again, again. One of my clients, he was doing twenty million twenty million revenue. He was paying three hundred grand every ⁓ so twenty million Canadian. So let's say fifty million US, and he was paying at least $200,000 every year just for that one fee. And I and I helped them realize that, bro, you can literally get a G bag for yourself in that money. So those are two things that you want to ⁓ keep in mind either plus plan or fifty more than 50% of your sales to the US. Now, revenue. It usually makes sense when you're doing at least 50k a month from a 50k USD a month from the United States. Because below that, you're paying more to your accountant ⁓ in cross border tax filing fees. then you're saving in Shopify fees. Right. And that's I fifty K there's obviously people ⁓ like I I mean I c I get people who are coming to me that are doing hundred a million in a month and they haven't set it up yet and I help them realize that and and and set up for them. And it comes yes, it does come with a slew of problems and we can we can talk about that once you get to speaker-1: No, absolutely. So you'd say like the the floor would probably be around fifty K. And where it really makes sense is if you're already experiencing if you're already on Shopify Plus and and you know you have like these different kind of buckets of where your sales are coming in through. ⁓ that's really good to keep in mind. Obviously on the plus plan, it makes things so much easier. We have helped people set that up before over at the agency. ⁓ but we never got into like the tax implication side of anything on that. ⁓ okay, so let's pretend that my made up store ⁓ is doing ⁓ well and we're on plus and we're you know doing okay in America and this we have realized that this is a problem that we are looking to solve. What is the process like to, as a Canadian company, to set up an American entity? And to take advantage of this way of selling. speaker-0: So before I get into that, just just reiterating that either you're in the plus or you have more than fifty percent of your sales from the US. Yes. So either of those some things. Right. Now the process is very simple to get that set up. You literally just open a USLC and set that put that on. So you set up the USLC, ⁓ which I have a video on my YouTube channel literally just showing you how to do that for free. ⁓ and you can literally just do it yourself in probably 10 minutes. You just set up a USLC. Now people at this point are ⁓ I can I can I can hear the question ringing that which state do I open it? There's like fifty states. Ninety-five percent of my clients go with Wyoming because it's simple, it ⁓ keeps your identity protected. So you do have that like anonymity, anonymity. And it's simple to kind of file taxes for every year as well. And it's a tax-free state. So Wyoming's the best. You can set that up online. There's a YouTube video showing you how to do that. Then you need a bank account to be able to get those payouts. To open a bank account, you ⁓ your bank is gonna ask you for two things. One is the the articles and this like basically the documents that you got when you opened the LLC. And second, to show that you registered with the IRS, which is an EIN, an employer identification number. Canadians would know this as a business number that they have in Canada. It's just for the US. To get an EIN it's pretty simple. ⁓ And simpler if you're a US citizen, but for foreigners, it's still somewhat simpler. ⁓ simple. And I've got a YouTube video on that as well. You just need the training to fill out a form, send it to IRS. The only thing is that the IRS is super slow. So it takes about six weeks. ⁓ in Q4, because there's so many e-commerce sellers starting up at that time, it can even take up to eight or ten weeks. So just want to be mindful of that. That until you have that IRS registration, the employer identification number, you cannot open a bank account. Can't open a bank account, you can't put it in your Shopify store. Okay. So open the LC, get the IRS registration, get the bank account. ⁓ for bank accounts, most banks, most banks do not accept foreigners because there's just a fraud risk. Slash bank is one of probably the only banks slash financial that is accepting foreigners. So you open a bank account with slash if if you're okay with that or wise, and then you set it up on the on the Shopify store. speaker-1: Man, you're making it sound a a lot easier than it it it seems, or is it kind of, you know, this is something that you could do yourself. speaker-0: So so a lot of ⁓ yeah, it is easier than than seems. It it sounds easier than seems. Where a lot of brands get s g get it wrong as Canadians is that and I'd say a majority of brands do this mistake, is that they put their own name when this when they start an LC, it asks for who is the owner and you're naturally inclined to put your own name on it. What happens is between US and Canada Canada there's a tax treaty and it exempts certain types of income from being double tax. Double tax means IRS asks you for money and CRA asks you for money. Like you basically get taxed on both sides of the border. Problem is, this treaty was set up before an LLC like anything such as an LC was ever known to my ⁓ to us. So the LC does not stop the basic the LLC is prone to double tax if you own it in your personal name. But if you own it under your existing Canadian company or you open a Canadian company and put it under that, then you're not subject to double tax. you're safe from basically paying tax on the same income twice. So that's a very big red herring ⁓ red flag rather, ⁓ to make sure that, you know, you n you put your Canadian corporation as the owner of the US L C not yourself. Yeah. And that's where a lot of brand brands get it wrong. Yeah. speaker-1: I could I could see that being super frustrating. speaker-0: You fill out the form at some website and it says who's the owner, first name, last name and you just put John Doe and just just that small thing. When it comes to file time to find taxes, ⁓ it means you're basically paying double tax on both sides of the board. speaker-1: I mean, I definitely get it. I when you have been in business for ten years, you unfortunately learn a lot about taxes and none of it is because you wanted to. speaker-0: Yes, hidden hid ⁓ yeah, exactly. You you stumble and then yeah, you learn from it. speaker-1: Now, ⁓ I guess I have a I've got a question, ⁓ I got a couple questions. And you and I can obviously talk all day. ⁓ before this we were running off on tangents about so much fun stuff. But ⁓ does does your expertise or your ⁓ kind of help when you're helping these e-commerce sellers, does it go the other way? Are you helping US sellers sell in Canada as well? Or is that not necessarily speaker-0: The one thing that your your earlier your earlier question was you make it sound simpler than it is. ⁓ in terms of when you open a USLC, it's literally just that, making sure that your Canadian company is the owner of the USLC, not you. What happens is that when it people don't realize that when they open the LC, they're all there obviously also tax filing and reporting requirements that need to be done, both in the US side and the Canadian side. Just putting it out there that Any foreigner, not even a Canadian, just any foreigner owning a USLC has to do this one disclosure requirement, and you can Google this, it's called Form 5472. Any foreigner owning a USLC has to report it to the IRS. I'm not gonna get into what it's required because that's gonna be a long topic. I have a YouTube video on that. But if you don't if you if you missed filing that, if you miss doing that filing or you do it wrong, or you're late, even a day late. There's an automatic penalty of $25,000. I've had clients that have gotten penalized for $25,000 and we had to fight with the IRS to to basically get that waived. But it's very difficult. So be very, very careful that when you open a USLC, you want to speak to a cross-border accountant that that that knows how to do these things because you you don't want to miss that deadline. That's all I'm saying. And even on the Canadian side, there's there's there's things you need to report and there's penalties for that. What we do is In our plans, like we've got our monthly plans, we do the opening of the USLC, we do the opening of the Canadian company if that's needed, we do the monthly books, we do the interfere tax filing in Canada and the US and this form that has that penalty. So then there's just one stop shop, you don't have to worry about those things. So that's for Canadians looking to ⁓ expand in the US or have expanded in the US. Now I can come to your question, which was what about US brands that want to expand into Canada? So If you're a US or any foreign foreign brand that wants to expand to Canada, the moment you hit thirty thousand dollars in sales, you are required to collect Canadian sales tax. US brands don't realize this because the ⁓ the the thresholds in the United States are much higher. Like New York, Texas, there's they've got half a million dollars of sales before you have to collect any sales tax. In Canada, it's literally thirty thousand. So, yes, we do help US LCs or foreign companies set up their accounts in Canada to be able to be compliant on on the Canadian side as well as on the US side. A a small example, ⁓ the gummy brand Harribo, which ⁓ maybe you're you you're you'll you're used to eating, we're have helping them set up in Canada ⁓ for their ⁓ Canadian sales. speaker-1: Hey everybody, just a quick reminder. Please like this video and subscribe if you haven't. We're releasing interviews like this every week. So don't miss out. Now back to the interview. You mentioned before ⁓ that you are also helping like not only with people selling in other countries, but you know, and setting up all that the correct way, but also maybe the main business. I, you know, I I don't know how to describe it, but it's like it's bookkeeping. That's That is what you're doing for these brands. ⁓ so could you ⁓ speak a little bit to that and how you're helping them solve ⁓ their annoying pain points there? Yeah. speaker-0: Yeah. So what what what we notice when just perusing through Reddit and Cora and all these things, like forums is that brands don't always have the visibility on how much they're making. Sure, they can check their ⁓ cost per acquisition, CAC and all of these things on Triple Way or something, but really seeing what their bottom line is, brands don't have that visibility. And they're everybody wants to save tax, nobody likes Uncle Sam, but When they come to their accounting at the end of the year, how much can you really do? It th the year is ended or it's about to end in a few weeks. There's no planning that can be done at that point. That's why we help brand a a and and and they and they don't have and you've spent the whole year clueless on basically whether I can speaker-1: Just making a mess with your purchases and your sales. speaker-0: Exactly. Yeah. Or or or just like, can I take money out of my business? Like what's the best way of taking money out? Do I take put put myself in salary? Can I take out money like a div like to basically a dividend, which is take money out wherever whenever you want? Or like can I can I purchase a car, lease a car, own my business, you know, things like that. If if you come to the accounting at the end of the year, there's hardly anything that that you're gonna get support for and hardly any tax saving. So what we do is we've got monthly plans where we're doing your books, so you're getting a profit and loss in your like sent to you every month. So you could be in the metro or whatever in the subway and you you've got you you can check your numbers on your phone and you know exactly how much you made last month. And it helps you to plan tax ⁓ taxes and save taxes proactively rather than at the end of the year when you you don't have any opportunity to do anything. That's it. So basically doing the taxes, doing the books and saving your taxes all at the same time under one roof. speaker-1: Yeah. Absolutely. I just from our experience as an agency, ⁓ we have a bookkeeper that we are talking with weekly probably, like what's this expense is usually what she's asking. ⁓ and you know, just making sure it it really just it takes some discipline to get your books set up the right way, your buckets set up the right way. And then obviously now with AI and automations, things can start to kind of sort themselves out, but there's always new things. ⁓ and that's just like the kind of like the busy work of running a business is you always need to be sorting these things and you know, putting them into the right places. I see a lot of people that just don't do that at all throughout the year. So then you come you're coming up on taxes or ⁓ whenever you're doing the end of your fiscal year, and they just create like this nightmare for themselves of like, okay, well now you have to look at 12 months of expenses and receipts. Like that, just don't do that. Like get somebody like Saul or whomever on a cadence of helping you with your books. All honestly, as a founder, you shouldn't be doing the books. Yeah. Like, don't be spending your time doing your books. You should be reviewing what you get back, though. Either that's a whole other thing. You should know your numbers and you should trust these buckets are the right way and collaborate on getting them set up. But like That's an easy thing to like one of the first things you can get off your plate. speaker-0: And I'll I'll I'll add something here. One of the first things that people do when they offload or delegate this is that they go online and they just find the cheapest ⁓ bookkeeper with like I don't know, $300, $400 a month. And what they don't realize is well, number one, this bookkeeper is working for you, he's working for a restaurant, he's working for, I don't know, a gas station, and they don't understand your business. They're gonna take payouts as income. Because that's what they're used to doing at every other ⁓ business. Now, the problem is when you report this to the government, either it be the CRA, the Canada Revenue Agency, or the IRS, they don't like if your Shopify is saying that you made a million this month or whatever this year, and but but but your payout was let's say eight hundred thousand, and they've taken the money that hit your bank account to pay out as your sales, that's completely wrong. The government's not gonna accept that. If they open an audit, And your sale your sales according to your QuickBooks and according to your tax returns says 800,000, but actually a Shopify portal says a million, they're gonna disallow that and they're gonna basically penalize you on the fact that you've done all everything wrong. If you have more tax to pay, then they're gonna be then they're gonna penalize you and give and charge you interest because you haven't paid that when the deadline was ⁓ whenever it was, right? And if if you paid If that's if they you pay too less tax. If you pay too much tax, let's say they don't audit you. And then five years go by, nobody audits you, nobody checks on this. Every year you're just paying too much tax because everything was done wrong, because you want to save, I don't know, a couple of hundred dollars a month on on a bookkeeper who's taking payouts as your income, right? So it's so so so those are a couple of things. That's one. The other thing is that ⁓ standard just basic bookkeepers don't realize because they're not tax accountants, they're not Doing your books in a way that's gonna optimize yourself for taxes. And when you come to your accountant at the end of the year, you want to pay them a some peanuts to do your books. They're not gonna look into your books, they're not gonna spend like three weeks looking into your books just to do your taxes. They're just gonna take what the bookkeeper gave. So basically, they're not saving any tax. You're paying just to get some paperwork done. So you end up paying more in taxes than you save ⁓ in the fee for an accountant or speaker-1: Absolutely. Yeah. speaker-0: That was a long that was a long spiel of a simple thing that I was trying to convey. speaker-1: Awesome. Sal, I cannot thank you enough for coming on the show. ⁓ and really just dumbing that down for me of like, this is things, this is what you should be doing. I it's as a as a consultant for e commerce brands, I mean I'm gonna be asking them this question ⁓ moving forward, making sure that they're just saving some easy money ⁓ in in that regard. Now, if I'm listening to this show and I find myself identifying, you know, with what you laid out earlier, it's like, ⁓ I'm doing over fifty grand in America or, you know, more half my business is in America, you know, ⁓ I'm on plus, ⁓ I, you know, all of this is just to my Canadian entity, you know, I feel this pain. Where should I go to learn more about this process to potentially speak with you? speaker-0: Sure, sure. I think the first thing would be there's free things out there. Like there's so many videos I have on YouTube where if you wanted to, you could do this yourself. So ⁓ you could literally just go to YouTube, ⁓ search for SAL accounting CPA. But yeah, if you wanted and and actually the there's one more thing. ⁓ I think probably next week, I'm putting out a three-step blueprint where people can just go through a PDF guide which tells them that every stage at every stage off their business, what would be the right step to take so that they're not having to face any of these penalties or interests or any of these issues. So that's something that they can download by going to salaccounting.ca and on the same website, they can speak to a book a call with my team and they'd love to help ⁓ help them out. speaker-1: Absolutely. And by the time this episode comes out, that free resource will absolutely be available on Sal's website. We'll make sure to link to his YouTube channel and to his website in the show notes. Sal, thank you so much. speaker-0: Thank you. Before we before we go though, I wanna flip over to you. Who are the what kind of brands get the most value from working with you? speaker-1: ⁓ wow. ⁓ let's see. I would say it would be e-commerce, like direct to consumer first e-commerce brands is usually like our bread and butter. CPG consumables, that's the the really fun stuff. when you have like a flagship product where you know you're selling one thing. majority of time is super fun. Basically anytime we can get really into the n the weeds around one particular problem and one particular solution and that solution being a product. And by the weeds I mean into the data. We want to look at customer surveys. We want to look at the analytics. We want to look at heat maps. Heat map dot com shout out. They might be sponsoring the podcast. I don't know. ⁓ but those three things tied with just there is a decade of experience minimum behind like the people on your on your team. ⁓ but yeah, all that stuff just creates compounding growth and that's super fun. Other than that, we do a lot of startup builds for funded startups. We do a lot of migrations. ⁓ we do so many migrations to Shopify. ⁓ it's a that's like half our business right now. Funny enough. speaker-0: Interesting. So there you go. Awesome. So now now you know if you're gonna work with Chase's team, what what size and what ⁓ sort of brand you wanna be. speaker-1: Yeah, you can tell when you have another when you have another host on the show, they do a good job of making you plug yourself, which is a really funny thing to do. Sal, thank you. speaker-0: All good man. All good.