Corporate tax and entity types compared across the United States, Canada and India reveals that the choice of vehicle matters as much as the headline rate. The U.S. offers pass-through entities such as LLCs, partnerships and S corporations alongside the C corporation. Canada taxes corporations and flows partnership income to the partners. India taxes companies, LLPs and firms as separate entities and offers a concessional regime for companies. This page compares the rates and structures for the 2025 and 2026 filing seasons, shows a simple example and explains what happens when one owner holds entities in two or three countries.
Corporate tax and entity types compared: rates
| Layer | United States | Canada | India (AY 2026-27 under the 1961 Act) |
|---|---|---|---|
| National rate | 21% on corporations (C corporations) | 38% basic, 28% after the federal abatement, 15% after the general reduction | 22% concessional regime; 25% if turnover in a base year was up to Rs 400 crore; otherwise 30% |
| Small-company rate | No separate federal rate | 9% net for CCPCs claiming the small business deduction | 15% on manufacturing business income under a special regime |
| State or provincial layer | Illinois: 7% plus 2.5% replacement tax for corporations | Provincial rates added; business limit of $500,000 in most provinces, $600,000 in Saskatchewan and Prince Edward Island, $700,000 in Nova Scotia | None; surcharge and 4% cess instead |
| Surcharge and cess | None | None | Surcharge of 10% for concessional regimes; 7% above Rs 1 crore and 12% above Rs 10 crore otherwise; cess of 4% |
| Alternative minimum tax | Applies only to very large corporations | None | MAT at 15% of book profit where normal tax is lower; not for concessional-regime companies |
| Pass-through business income | Partnerships, S corporations, LLCs | Partnerships and sole proprietorships | LLPs and firms are taxed as entities, not as pass-throughs |
The IRS says corporations figure their tax by multiplying taxable income by 21%. The CRA states that the basic Part I rate is 38%, 28% after the federal abatement, and 15% after the general tax reduction, with a net 9% for a CCPC that claims the small business deduction. Provinces move their own rates: the CRA's rate page notes that Newfoundland and Labrador's lower rate fell to 2.0% on January 1, 2026 and Ontario's lower rate is 2.2% from July 1, 2026. On the Illinois side, the Department of Revenue lists a 7% corporate income tax and a 2.5% personal property replacement tax for corporations, and 1.5% replacement tax for partnerships, trusts and S corporations. In India, the income tax department's AY 2026-27 guidance shows 25% for companies whose turnover did not exceed Rs 400 crore in the specified earlier year, 22% for companies opting for the concessional regime, 15% and 22% for qualifying new manufacturing companies, 30% for other domestic companies, and a 4% cess. India's Income-tax Act, 2025 took effect on April 1, 2026, and the Budget for 2026-27 proposed changes to MAT, so your CA confirms what applies to the year you are filing.
Which entity types exist in each country?
| Need | United States | Canada | India |
|---|---|---|---|
| One owner, no liability shield | Sole proprietorship | Sole proprietorship | Sole proprietorship |
| Shield with flow-through tax | LLC taxed as a sole proprietorship or partnership; S corporation | Limited partnership, where limited partners have a shield and income flows to partners | LLP has limited liability but is taxed as an entity |
| Separate corporate tax | C corporation | Corporation, federal or provincial | Private limited company or public company |
| Small closely held company | S corporation (domestic, up to 100 shareholders, one class of stock, no nonresident alien shareholders) | CCPC | Private limited company; one person company in some cases |
| Foreign parent's presence | LLC or C corporation subsidiary; branch | Subsidiary or branch | Subsidiary, branch or liaison office under foreign exchange rules |
| Annual return | Form 1040 Schedule C, 1065, 1120-S or 1120 | T2 for corporations; T1 for sole proprietors | Company or LLP annual filings plus income-tax return |
The IRS requires an S corporation to be a domestic corporation with no more than 100 shareholders and one class of stock, and it excludes partnerships, corporations and nonresident aliens as shareholders. Canada's CRA requires a T2 return within six months of year-end, with the balance generally due two months after year-end, or three months for a qualifying CCPC. See U.S. entity types and tax forms, Canada's small business deduction and setting up a business in India.
What this means for owners in more than one country
- Labels do not match. An LLC that the U.S. treats as a flow-through can be classified as a corporation elsewhere, which may produce mismatched tax results. Canada in particular treats a U.S. LLC differently from the U.S.; your Canadian CPA confirms.
- S corporations are U.S.-only. A non-U.S. shareholder blocks the election, so foreign-owned businesses often use C corporations or LLCs.
- Profit comes out through dividends, interest or fees. Each has its own withholding and treaty treatment; see repatriating profits and dividends.
- Related-party pricing. Payments between your U.S., Canadian and Indian companies need documentation. See India transfer pricing basics.
- Foreign-owned U.S. entities. Many carry extra U.S. annual reporting; see the foreign-owned LLC guide.
A worked example
The same profit, in each country's own currency, shows how structure matters. A Naperville C corporation with $500,000 of taxable income owes 21% federal tax, $105,000, plus about 9.5% Illinois income and replacement tax, $47,500 before apportionment and deductions, so roughly $152,500 before any federal deduction for state tax. A CCPC earning CAD 500,000 of active business income within its business limit pays 9% federal, CAD 45,000, plus provincial tax. An Indian domestic company with Rs 5 crore of taxable income under the concessional regime pays 22%, Rs 1.1 crore; a 10% surcharge of Rs 11 lakh; and 4% cess on both of Rs 4.84 lakh, so Rs 1.2584 crore in all. These are not comparable results: currencies, deductions, state or provincial layers and what happens when profits reach the owner differ.
Mistakes to avoid
- Reading "21%" or "15%" as the total corporate tax burden.
- Electing S status when any shareholder is a nonresident alien.
- Assuming a Canadian CCPC rate is available to a subsidiary of a foreign company.
- Treating an Indian LLP as a pass-through.
- Forgetting MAT, surcharge and cess when estimating Indian tax.
- Ignoring the Illinois replacement tax.
How we can help
Our Aurora, Illinois firm prepares U.S. entity returns and coordinates with your Canadian CPA and Indian CA so entity choices, elections and filings agree in every country. See business tax returns and planning, business formation and registrations and startup and equity tax planning. More three-country tables are on the comparisons hub.
Frequently asked questions
Is an LLC taxed the same way in the U.S., Canada and India?
No. The U.S. lets an LLC choose its tax classification, Canada has no LLC, and India's closest vehicle is the LLP, which is taxed as an entity.
What is a CCPC?
A Canadian-controlled private corporation, a private corporation controlled by Canadian residents. It can claim the small business deduction and a lower rate on active business income up to a business limit.
Does Illinois tax S corporations?
Yes. The Illinois Department of Revenue lists a 1.5% replacement tax on S corporations and partnerships, in addition to owner-level tax.
Which Indian company rate applies to me?
It depends on your regime election, turnover and whether you are a qualifying manufacturer. Your Indian CA confirms the right regime for the year.
Can a foreign owner use an S corporation?
No. The IRS says nonresident aliens cannot be S corporation shareholders.
Official sources
- IRS: Publication 542, Corporations
- IRS: S corporations
- Illinois Department of Revenue: Income tax rates
- CRA: Corporation tax rates
- CRA: T2 Corporation Income Tax Guide, before you start
- Income Tax Department (India): Domestic company return guide for AY 2026-27
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.