UK company wants to start up a subsidiary in the US. The first employee and the person heading it up will be a Canadian citizen living in Montreal. What issues if any does this structure pose?
I have helped ~40 foreign clients bring their businesses to the US and have blogged extensively about the issues they face. I recommend that you start at my blog's Foreign Countries page and follow links from there.
Formation of a corporation and obtaining an Employer Identification Number will be reasonably straightforward. Having a Canadian employee will be relatively straightforward from the US perspective (adapting standard employment-related documents), though I am not qualified to comment on additional paperwork that will be required to address Canadian legal issues or on the mechanics of paying the individual.
You will need, in the US, both a lawyer and an accountant / tax advisor who have experience working with international clients.
Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.