Scaling Smart: 10 Cross-Border Questions Every Canadian Start-up Should Ask

If you’re a founder with global ambitions, decisions around how to fund, structure, and grow your business—especially across the U.S.-Canada border—can have major long-term impacts. At this year’s Vancouver Startup Week, DMCL partner Marcus Brandt walked founders through some of the most important questions he hears from clients looking to scale smart.

From incorporation and investor agreements to tax strategy and software tools, here are ten key questions Marcus covered—and what every founder should consider before making their next move.

1. Should I raise interest-bearing debt or seek investors?

Debt means retaining ownership and control but comes with repayment obligations (often with interest). Equity involves giving up a portion of your business in exchange for funding, which may better suit start-ups without predictable revenue. Your decision should align with your growth stage, cash flow, and appetite for risk.

2. What are SAFE Agreements and is there a Canadian equivalent?

SAFE (Simple Agreement for Future Equity) agreements are a popular way to raise capital in the U.S. without immediately issuing equity.

A U.S. SAFE Agreement may not meet the requirements under Canadian securities law. As such, we recommend that you contact your Canadian legal advisor to ensure that a SAFE Agreement meets the requirements under Canadian law.

Canadian start-ups also often offer convertible notes and other hybrid instruments. Each come with tax and legal implications. Talk to your legal and tax advisors before issuing any of these types of instruments.

3. What’s the best province or U.S. state to incorporate in?

In Canada, B.C. is a top choice for start-ups thanks to its simplicity and lower compliance costs. B.C. corporations don’t need to have Directors who are resident in the province, paving the way for corporations with Directors who may choose to live out of province. In the U.S., Delaware is popular for its business-friendly laws and court system, but incorporation decisions should also contemplate where you operate, where your investors are, and your future funding plans.

4. Should I create a parent–sub or a ‘sister’ company structure?

A Canadian parent company can help maintain Canadian-Controlled Private Corporation (CCPC) status and unlock valuable refundable tax credits—refunds that don’t depend on whether or not your company has taxes otherwise payable. In some cases, a ‘sister’ structure—where the Canadian and U.S. entities share owners but have no direct ownership link—can offer operational and tax advantages while keeping the businesses legally distinct. Each situation is unique, and it’s important to discuss your specific situation with your legal and tax advisor.

5. When are SR&ED credits refundable, and how useful are non-refundable ones?

If you’re a CCPC, Scientific Research & Experimental Development (SR&ED) credits can be refundable even without taxable income, which is a major cash-flow boost. Non-refundable credits, which apply to foreign-controlled corporations, reduce taxes payable but offer no cash benefit when your company isn’t yet paying tax in Canada.

6. What is transfer pricing and do I need to worry about it?

Transfer pricing is the methodology by which companies in a corporate group allocate profits amongst one another. You do need to consider transfer pricing if your Canadian company is doing business with a related entity in another country (like a U.S. subsidiary or sister company). You’ll need to ensure those transactions are priced at market value, using an accepted transfer pricing methodolgy as established by tax authorities. Both CRA and IRS expect proper documentation and may audit your transfer pricing arrangement.

7. What’s the difference between CCPC and non-CCPC tax rates, and how do U.S. state rates compare?

CCPCs benefit from a lower tax rate on the first $500,000 of active business income. Losing CCPC status—such as through foreign ownership—means paying higher federal and provincial rates. In the U.S., tax rates vary by state: some have no corporate income tax (e.g., Nevada), while others impose significant tax rates (e.g., California).

8. Should I sell my company through an asset sale or a share sale?

From the buyer’s perspective, an asset sale is often simpler and can result in less risk. For sellers, a share sale can be more tax-efficient. In Canada, the Lifetime Capital Gains Exemption (LCGE) can shelter up to $1.25M in gains (in 2025, and inflation adjusted for future years) if certain conditions are met. The US also has legislation in place that can result in benefits for equity sales. Structure matters—get advice early.

9. What accounting software should I use?

For early-stage start-ups, cloud-based tools like QuickBooks Online, Xero, and Wave offer user-friendly features and scalability. The right platform depends on your industry, reporting needs, and whether you’re managing multiple currencies or entities across borders.

10. What else should I know before expanding across borders?

Don’t overlook compliance. Legal liability protection, annual filings, trademark/patent registration, payroll, sales tax, and contractor reporting requirements vary between Canada and the U.S. Planning for these from day one will reduce risk and save future headaches.

Cross-border expansion adds complexity—but it also opens the door to growth. Whether you’re deciding how to structure your business, raise capital, or navigate tax compliance in two countries, having the right advisors is essential.

At DMCL, we help Canadian start-ups manage their accounting, compliance, and advisory needs on both sides of the border. From incorporation through to exit planning, your DMCL advisor has got you covered.