Can a Foreigner Open an S Corp?
Can a Foreigner open an S Corp?
Yes, under the U.S. tax code, a foreigner, non-citizen, resident alien may be an S corp shareholder. Said another way, an S corporation can be owned by a foreigner, non-citizen, only if they have a permanent residency (Green Card). However, an S corporation generally cannot be owned by a nonresident alien. So does having a green card nesesarly mean being a Non-Resident?
Resident Aliens May Own S Corporations
Many owners of companies in the United States are not citizens. Informally, they are foreigners. They may want to have their company (including an LLC, partnership, or corporation) elect to be taxed as an S corp. This requires filing an S corp election. One key question is whether they are a resident alien or nonresident alien.
Under United States tax law, an S corporation generally cannot have a “nonresident alien as a shareholder.” IRC § 1361(b)(1)(C). A nonresident alien is neither a citizen of the United States nor a resident alien. Id. § 7701(b)(1)(B). A person qualifies as a “resident alien” if the person is “a lawful permanent resident of the United States,” fulfills the “substantial presence test,” or fulfills the “first-year election” requirements. Id. § 7701(b)(1)(A).
What defines a RESIDENT ALIEN?
A person qualifies as a “resident alien” if the person is “a lawful permanent resident of the United States,” fulfills the “substantial presence test,” or fulfills the “first-year election” requirements. Id. § 7701(b)(1)(A).
Substantial Presence Test?!! (See where I'm getting?)
You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.
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