Buying A Dealership In the U.S Is Actually Pretty Simple.
Updated: Apr 24, 2019
As larger dealer groups are seeing a compression on available larger market branded dealerships in Canada, we are now starting to see Canadian dealer groups expanding to the US. Some more recent/notable transactions were the Auto Canada purchase of the Grossinger Auto Group in Illinois and Alpha Auto groups purchase of Wilsonville Toyota.
American stores are becoming more appealing to the Canadian dealers based on the availability of larger market metro branded stores, reduced goodwill multiple requests, growth potential (often single point owners) and the ability for Canadian dealers to wholesale used vehicles and make the spread on exchange.
What You Need To Know
Quite similar to purchasing/owning dealerships in Canada, there are some common requirements and some state independent requirements for each specific location. In doing some research, I have compiled a list of questions that you will likely be asking yourself.
Do you need to be American to own a US company?
You are not required to be an American citizen to own a dealership in the US, but there are restrictions on if you intend on becoming the owner/operator. In these scenarios, you will have to apply for either a green card or work visa. If you simply wish to own part or all of a company then the visas are not required.
Sales Registration Courses.
Each state offers their own version of Sales Courses required to be a licensed seller/dealer. For the most part, if you are planning on owning a dealership in the US, I would strongly recommend having a compliant Sales license (though if you are not engaging in selling, not all states require owners to complete the courses).
Dealer Application forms and process.
Most of the regulatory arm of the automotive industry in the US is handled by the DMV/Motor Vehicle Division. This would be similar to an OMVIC, AMVIC, BCVSA in Canada. Below are 2 links for Montana and California as an example. You will be able to see that their requirements are very similar to that of ours in Canada.
California Application Form:
Montana Application Forms:
Registering a Company/Corporate Tax. .
You can use a company such as activefilings.com that provides a good resource for figuring out what kind of Corporation you would need. I have also found that there are varying taxations state to state and based on what kind of corporation your register (either a S-Corporation, C-Corporation or LLC). Below is a good article on tax planning in the States but I would strongly recommend you consult with a local tax planner or current owner/CFO or controller to optimize the tax savings. It is also important to know that in the US there is a standard Federal tax but also varying State and County taxes depending on the location.
Do I need a US address to incorporate a business in the US?
No you don’t. But you are required to use Registered Agent Services and that is the only state requirement related to physical address. Registered Agents service allow you to incorporate or form a LLC in the US. However, in order to open a bank account or to obtain an EIN (Tax ID), you are going to need an US mailing address (not necessarily in the state of formation). In this case we recommend you to look for a “mail forwarding” service provider.
Can my foreign company be the owner of our US LLC or Corporation?
If you form a LLC, yes. Instead of appointing an individual as “managing member” you can appoint your own foreign company. If you chose to form a Corporation, at the time of registration we only appoint “Directors” and they have to be individuals. Please note that Directors does not own a corporation. A corporation is owned by its shareholders, and from this point of view, your foreign company can own 100% of any US corporation.
We want to create a branch of our company. Is that possible?
The US does not have an entity type called “Branch”. In order to do so, you need to incorporate a business (or form a LLC) and then establish the relationship through internal resolutions and ownership. No filing is involved with this action.
At Tim Lamb Group we have over 90 active listing and process billions in annual transactions. We are committed to our clients, respect their discretion and have continually been the market leader. If you are considering an expansion or selling active stores. Please reach out to me and I would love to help!
Gordie Gerbrandt
January 15th 2019