what is an unlimited liability corporation ulc 
an unlimited liability corporation ulc is a corporate structure used in canada that allows shareholders to be liable if the company declares bankruptcy sometimes ex shareholders are also liable depending on how recently they sold their stock despite this disadvantage the structure of a ulc can be preferable in certain circumstances due to the tax benefits granted to shareholders of these companies an unincorporated joint stock company jsc is the united states equivalent to an unlimited liability corporation jsc shareholders have unlimited liability for company debts if for some reason it finds it more advantageous to do so a ulc can elect to be treated as a corporation by checking the appropriate box on its tax return understanding unlimited liability corporations ulcs generally the concept of unlimited liability involves general partners and sole proprietors who are equally responsible for debt and liabilities accrued by the business as the word unlimited implies this liability is not capped and can be paid off through the seizure of owners personal assets as opposed to limited liability structures which cap responsibility to the amount a person actually invested in a company thus shielding private wealth most corporations are limited liability structures that s one of the points of incorporation an unlimited liability corporation is sort of a hybrid it is an incorporated entity with unlimited liability the ulc shelters shareholders from liability in most circumstances with one major exception upon liquidation of the company if that happens shareholders become liable for the debts of the company ex shareholders can also be held responsible if they disposed of their shares less than one calendar year before the bankruptcy occurs organizing as a ulc is only available for businesses operating in three canadian provinces alberta british columbia and nova scotia 1advantages of an unlimited liability corporation ulc the unlimited liability corporation has become a useful vehicle for u s investors who wish to acquire or put money into a canadian business or an american company looking to set up shop in canada due to the preferential tax treatment a ulc is treated as a regular canadian corporation for tax purposes as such it s subject to canada s 25 withholding tax on the payment of shareholders dividends and interests though the canada revenue agency allows this to be alleviated by deeming the dividend a distribution of capital however the u s internal revenue code states that the ulc is disregarded as a corporation for u s tax purposes as profits and losses flow through to shareholders it doesn t pay corporate tax in other words so like u s partnerships and other flow through entities a ulc avoids the issue of double taxation its primary advantage also flowing through the company s losses can help shareholders offset their income thus reducing their taxes american shareholders can in addition claim foreign tax credits on their tax returns offsetting the canadian withholding tax for businesses another benefit of forming an unlimited liability subsidiary may be nondisclosure public reports on money the company moves through the ulc or tax payment amounts are not required 