"Overview of the Differences between the U.S. and Canadian Entity Classification Systems"
Entity classification refers to a set of rules used in the U.S. tax system to classify entities for the purposes of the Internal Revenue Code. Once classified, the entity will either be subject to the Code rules for corporations or the Code rules for partnerships.
The Canadian tax system, on the other hand, does not have entity classification rules. Instead, the Canadian tax system simply categorizes entities for tax purposes based on their classification under commercial law. Commercial law recognizes corporations, partnerships and trusts, and the tax system has separate regimes that apply to each. Where these rules apply to human beings, the tax system refers to them as “individuals”.