Individual LLC members are in effect subject to 25% branch profits tax

Where a US LLC with qualifying US members carries on a branch business through a Canadian permanent establishment, CRA considers that the branch earnings are computed by the LLC, with the LLC paying the reduced rate of branch profits tax available under Art. X(6) of the Treaty (i.e., 5%, or nil if the $500,000 exemption has not been utilized) based on the share of the branch profits that are considered to be derived by its qualifying corporate members.  Among other things, this means that the share of its branch profits that are considered to be derived by an individual member is subject to full (25%) branch profits tax - notwithstanding that the individual would not be subject to branch profits tax if he or she carried on the Canadian business directly.

Furthermore, the LLC is considered to have only one $500,000 cumulative exemption that must be shared among its corporate members (and associated companies).

Neal Armstrong.  Summary of 23 October 2012 T.I. 2012-0440101E5 under Treaties - Art. 10.