Selling via LLC in Florida: what changes for a Canadian seller

Section 01Who this guide is for, and who it is not for

This guide is written for a Canadian resident who already owns a Florida property through a US LLC, or who is being told by an advisor that an LLC would be a good vehicle to hold one. It assumes the property is residential or small commercial real estate and that the LLC owns only that one asset.

It does not cover: US citizens or US tax residents who happen to live in Canada (different treaty mechanics under Article IV(6)); funds, REITs and publicly traded partnerships (different regimes under IRC § 897(h) and § 1446(f)); or cases where the LLC has elected to be taxed as a US C-Corporation under Form 8832, which materially changes both the FIRPTA analysis and the CRA analysis. C-Corp election is briefly noted below but a dedicated guide is the better reference.

Section 02Why Canadians use a Florida LLC in the first place

The two real, defensible reasons are non-tax. An LLC provides limited liability to the member: a tort claim arising from the property (a tenant injury, a guest accident) generally reaches LLC assets, not the member's personal Canadian assets. An LLC also adds a layer of privacy in the public record, since the deed names the entity rather than the individual.

Section 03How the IRS taxes the LLC: three classifications

US tax law does not have a single "LLC tax regime". Under Treas. Reg. § 301.7701-3 and IRC § 7701, an LLC is classified depending on its membership and on any election it has filed.

The core point: there is no single answer to "does FIRPTA apply when I sell through my LLC". The answer depends on the LLC's classification and on whether the sale is structured as a deed sale of the property or a sale of the LLC interests.

Section 04Asset deal versus interest deal: the two ways to sell

A Canadian who wants to exit a Florida property held through an LLC has, in practical terms, two paths.

Path 1: the LLC sells the property by deed. The buyer takes a warranty deed from the LLC, the LLC dissolves or is left as a shell, and the proceeds flow to the member. This is the standard residential transaction. From the Florida side, the deed triggers documentary stamp tax under F.S. § 201.02(1)(a) at 70 cents per USD 100 of consideration in all counties except Miami-Dade, where the rate is 60 cents per USD 100 plus a 45 cent surtax (the surtax does not apply to single-family dwellings). From the federal side, FIRPTA applies as described above when the LLC is a single-member disregarded entity owned by a Canadian. The Canadian member files Form 1040-NR and Schedule D for the year of the sale, with FIRPTA withholding (Form 8288-A) credited against the actual US tax liability.

Path 2: the buyer purchases the LLC membership interests. Instead of a deed, the membership interest assignment is signed, the buyer becomes the new member, and the LLC continues to own the property. This is rarely used in residential resale. It appears in commercial deals, in family transfers, and occasionally in negotiations where the buyer wants to preserve grandfathered features of the entity. Two issues need explicit attention.

First, the Florida conduit entity rule. Under F.S. § 201.02(1)(b), if the property was contributed to the LLC without paying full documentary stamp tax (the typical case where a Canadian simply formed an LLC and deeded the home into it), the LLC becomes a "conduit entity". A sale of LLC interests within three years of that contribution is subject to documentary stamp tax based on the consideration paid for the interests, prorated to the value of the Florida real property held by the LLC. After three years, the conduit entity rule no longer applies. This is a Florida state rule, separate from federal income tax. Many Canadian sellers learn about it the week of closing.

Second, the federal withholding analysis on a sale of LLC interests. If the LLC is a single-member disregarded entity owned by a Canadian, the IRS looks through the entity entirely. The transfer of the LLC interest is treated as a direct transfer of the underlying USRPI by the foreign owner, and FIRPTA withholding at 15% under IRC § 1445 applies to the gross amount realized. If the LLC is a multi-member partnership, IRC § 1446(f) requires the buyer to withhold 10% of the amount realized on the transfer of the partnership interest, except where a regulatory exception applies (the most relevant being a treaty exemption certification, which is generally not available to Canadian residents on real estate gains because Article XIII(1) of the Canada-US treaty assigns taxing rights on real estate gains to the situs country). If the LLC has elected C-Corp treatment and is a USRPHC, FIRPTA at 15% applies on the share sale itself.

Section 05The CRA-LLC mismatch: the central trap

This is the most important section of the guide and the section the original article omitted entirely.

The practical consequences for a Canadian who sells through a single-member LLC are sharp:

1. The IRS taxes the gain in the year of sale at the member level (because the LLC is disregarded). The Canadian member receives the proceeds net of FIRPTA withholding.
2. The CRA does not see a flow-through. It sees a foreign corporation. The Canadian-source taxable event for the member is not the LLC's gain, but a deemed dividend if and when the LLC distributes proceeds to the member, taxed as foreign dividend income at the member's marginal Canadian rate.
3. The foreign tax credit mismatch follows: the US tax was paid on a capital gain (paid by the member because the LLC was disregarded), and the Canadian tax falls on a foreign dividend (a different income category in the CRA's eyes). Canadian tax law does not always allow a clean credit for US tax paid on a different income category. In some structures the credit is denied entirely, in others it is partial. The result is double taxation in fact, even when each country acted within its own logic.
4. T1134 (Information Return Relating to Controlled and Not-Controlled Foreign Affiliates) is required of the Canadian member for each year the LLC is held. T1135 (Foreign Income Verification Statement) is required if the cost amount of foreign property exceeds CAD 100,000.

Section 06Sale process: Canadian side and Florida side, jurisdiction by jurisdiction

This table covers a Quebec resident as the reference province. Equivalent comparisons for Ontario, British Columbia, and Alberta are being published in this chapter.

Section 07Worked example: a Canadian sells a Boca Raton condo through an SMLLC

US side, federal:

• FIRPTA applies. Maple LLC is disregarded; Marie is treated as the foreign seller under Treas. Reg. § 1.1445-2.
• Buyer withholds 15% of USD 600,000 = USD 90,000 and files Form 8288 with Form 8288-A within 20 days of closing.
• Marie files Form 1040-NR for tax year 2026 with Schedule D. Realized gain is USD 600,000 minus USD 420,000 minus closing costs (illustrative USD 35,000) = USD 145,000.
• Long-term capital gains rate for non-residents on gain over USD 89,250 (illustrative 2025 thresholds) is 15%, possibly 20% above USD 553,850. On USD 145,000 the federal long-term capital gain tax is approximately USD 21,750.
• USD 90,000 was withheld; USD 21,750 is owed; Marie applies for a refund of approximately USD 68,250 on the Form 1040-NR.

US side, Florida:

• Florida documentary stamp tax on the deed: USD 600,000 / 100 × 0.70 = USD 4,200 (Palm Beach County rate). Borne by the seller per Florida custom. No conduit entity issue because the sale is by deed, not a transfer of LLC interests.
• No Florida state income tax.

Canadian side:

• The CRA does not recognize the LLC's flow-through. The taxable Canadian event is the distribution from Maple LLC to Marie, treated as a foreign dividend.
• If Maple LLC distributes the full net proceeds in 2026, Marie reports foreign dividend income at the Canadian-equivalent value (currency-converted) on her T1 General. Foreign tax credit interaction is the source of the trap: the US tax was paid on a capital gain, the Canadian tax falls on a dividend; the credit may be denied or limited.
• T1134 is required for 2026 (Maple LLC is a foreign affiliate). T1135 was required for each prior year if cost amount of foreign property held by Marie exceeded CAD 100,000.

Section 08Common mistakes Canadian sellers make with an LLC

1. Assuming the LLC saves US tax on the sale. It does not. FIRPTA applies through the disregarded entity; the gain is taxed at the same rate as a direct sale.
2. Assuming the LLC hides the property from the IRS. It does not. Form 5472 reporting, Form 1040-NR with Schedule D, and Form 8288-A all attach the property and the gain to the foreign member.
3. Assuming the LLC simplifies Canadian tax. It complicates it. T1134 and the foreign-corporation classification create year-after-year compliance and a credit mismatch on exit.
4. Trying to sell LLC interests within three years of contributing the property to avoid the deed transfer. Florida's conduit entity rule, F.S. § 201.02(1)(b), captures the doc stamp tax anyway. The DOR's Emergency Rule 12B-4.060 walks through the worked examples.
5. Forgetting that the buyer of LLC interests in a multi-member LLC owes 10% withholding under IRC § 1446(f). This often surprises buyers' counsel and delays closings.
6. Distributing sale proceeds in a year different from the sale year. This worsens the US-Canada timing mismatch and often increases double taxation. If the LLC must distribute, doing so in the same year usually limits the damage. Run the timing with a cross-border CPA.
7. Filing only the FIRPTA forms and skipping the 1040-NR. FIRPTA withholding is a prepayment, not a final tax. The actual US tax, and any refund, is determined on the 1040-NR. Skipping the return forfeits the refund.

Section 09Actionable checklist before closing

1. Obtain an ITIN if not already held. Form W-7 with the IRS, supporting documents certified by an Acceptance Agent. Without an ITIN, the FIRPTA process and any refund claim are blocked.
2. Confirm the LLC's federal classification in writing. Pull the EIN assignment letter, the operating agreement, and any Form 8832 election letter. The closing agent and the buyer will ask.
3. Confirm Florida documentary stamp position. If the sale is by deed, doc stamp is paid at closing. If the sale is of LLC interests, ask counsel whether the conduit entity rule applies and request a written analysis.
4. Decide whether to file Form 8288-B before closing for an early FIRPTA refund. The IRS now processes 8288-B in approximately 90 to 180 days. See the dedicated guide on Form 8288-B: FIRPTA early refund.
5. Engage a cross-border CPA for the year of sale. Confirm T1134 filing for the LLC, the timing of any LLC distribution to the member, and the foreign tax credit position on the Canadian return. This is not the place to save fees.
6. Coordinate currency repatriation with a regulated FX provider rather than by spot bank conversion. See the guide on Repatriating funds after sale: USD to CAD.
7. Plan the LLC's wind-down. A dormant LLC continues to generate Florida annual report fees and US filing obligations until formally dissolved with the Florida Division of Corporations.

Section 10FAQ

Does FIRPTA apply if I sell my LLC instead of selling the property? For a single-member LLC owned by a Canadian, yes. The IRS looks through the entity and treats the sale of the LLC interest as a sale of the underlying USRPI. For a multi-member LLC, the buyer must withhold 10% under IRC § 1446(f) on the partnership interest transfer, with limited exceptions.

If I elect C-Corp treatment for my LLC, do I escape FIRPTA? Not entirely. A C-Corp election removes FIRPTA at the level of a deed sale by the LLC. But the corporation owes US corporate tax at 21% on the gain, and if the corporation is a USRPHC (which a real-estate-only entity almost always is), FIRPTA reapplies at 15% on a sale of the corporation's shares by the foreign owner. Election to C-Corp is rarely net-positive for a single-property holder.

What happens if I owned the LLC for more than three years before selling LLC interests? The Florida conduit entity rule under F.S. § 201.02(1)(b) only catches sales of LLC interests within three years of the property contribution. After three years, an LLC interest sale is not subject to Florida documentary stamp tax. Federal withholding rules (FIRPTA or § 1446(f)) continue to apply regardless of holding period.

Can the Canada-US treaty fix the LLC mismatch? Article IV(6) of the 2008 Fifth Protocol provides limited look-through, but the CRA's published position is that this relief extends to US residents using fiscally transparent entities, not to Canadian residents. The relief does not solve the foreign-tax-credit mismatch for a Canadian member.

Is a Limited Partnership a better vehicle for a Canadian buying Florida real estate? A US Limited Partnership with a corporate general partner is often recommended by cross-border tax practitioners as a flow-through vehicle that the CRA does recognize as a partnership. A dedicated guide is being added to chapter 01 acquisition.

How is the LLC reported on the Canadian return each year I hold it? T1134 Information Return Relating to Controlled and Not-Controlled Foreign Affiliates is required annually. T1135 Foreign Income Verification Statement is required if total cost amount of specified foreign property exceeds CAD 100,000. CRA penalties for late or missing filings are non-trivial.

Section 11Related guides on this site

• FIRPTA explained: the 15% withholding when a Canadian sells Florida real estate
• Form 8288-B: FIRPTA early refund
• Schedule D and Form 1040-NR for Canadian sellers
• Canadian capital gains: 50% inclusion rate
• Canada-US Treaty Article XIII: real estate capital gains
• Florida documentary stamp tax § 201.02
• Repatriating funds after sale: USD to CAD