It's only a nightmare if you hate all taxes and labour rights. So, you know, YC
Since this is purely about ownership structure and equity governing law, I'm curious what the intersection you're seeing between these terms and "labour rights" are. We're a US company with employees in Europe (not even an HQ in Europe, just employees there), and I've learned more about European labor law idiosyncracies over the last few years than over the whole rest of my career, because I've had to.
Having a Canada-registered company is usually required to get government grants and loans from Canadian banks, although that's probably not very important to VC-backed companies. There are also some tax advantages to running a Canada-registered company if you're based out of Canada, plus it's much easier to find a local professionals (lawyers, accountants, etc.) familiar with Canadian corporations than US corporations.
None of these issues should cause too many problems, but if given a choice, as a Canadian I'd certainly prefer to run a Canada-registered company over a US-registered one.
Read the thread: clearly a lot of people are reading this as "you can't HQ in Canada, your team has to move".
I don't think that's true. You can't have employees without a local subsidiary. If you're going through an EOR agency, they're contractors not employees.
It's complicated. In theory, US states have more rights and powers ("The powers not delegated to the United States [...] are reserved to the States" [0]), but in practice, the Commerce Clause lets the Federal government do essentially anything that it wants. Canada's provinces are only given control over a specific set of topics [1], but their powers are almost absolute in these areas, since the courts almost never let the Federal government interfere.
So for labour code specifically, US companies need to adhere to both Federal and state labour codes, while Canadian companies only need to follow a single provincial labour code. (There is a Canadian Federal labour code, but that only applies to Federally-regulated companies, and those companies don't need to follow the provincial labour codes)
[0]: https://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_...
[1]: https://en.wikipedia.org/wiki/Constitution_Act,_1867#Part_VI...
