Unlimited Liability Corporation (ULC)

An unlimited liability corporation (ULC) is a corporate structure used in Canada that allows shareholders to be liable for assets and liabilities of a company if the company declares bankruptcy. Sometimes past shareholders are also liable. This structure can be preferable in certain circumstances due to the tax benefits granted to shareholders of these companies.

An unlimited liability corporation (ULC) shelters shareholders from liability in most circumstances except upon liquidation of the company. Shareholders or past shareholders that disposed of their shares less than one year before liquidation become liable for the debts of the company. The unlimited liability corporation has become a useful vehicle for the acquisition of a Canadian business by a U.S. investor, due to preferential tax treatment. The U.S. Internal Revenue Code states that the Unlimited Liability Company is disregarded for U.S. tax purposes, as profits and losses flow through to shareholders.