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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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A friend of mine staying in Korea set up company LLC (sole

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A friend of mine staying in Korea set up company LLC (sole prop) in NJ in March 2011 through lawyer in NJ. And He received E-2 visa and will come to US in March 2012.
1) For 2011, does E-2 visa investor need to file 1040NR for his business as schedule -C?
2) Does E-2 visa investor need to elect C Corporation from sole prop and then receive W2 from the company or keep sole prop and file 1040 with schedule c in order to keep E-2 visa status?
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.

Hi and welcome to Just Answer!

Any alien regardless on the visa - will need to determine if he/she is a resident alien or nonresident alien for tax purposes.

 

Your friend's tax liability will be based on determination if your friend is a resident for tax purposes or non resident (please do not confuse with residency requirements for immigration purposes).

Generally - if your friend will be in the US more than 6 months in 2012 - he/she will be residents for tax purposes. Please see page 5 in this publication - Nonresident Alien or Resident Alien? - www.irs.gov/pub/irs-pdf/p519.pdf

 

If your friend will be a resident alien for tax purposes - your friend will be taxed on all worldwide income and will file the tax return the same way as all other US persons - using the form 1040 - not the form 1040NR which is used by nonresident aliens.

The business income will be reported on schedule C - which should be attached to the form 1040.

 

Because E2 visa holders are getting general work permit - there is no limitation to comply with the visa status - your friend may continue to run LLC and be treated as solo proprietor. E2 visa permits self-employment.

Let me know if you need any help.

Customer: replied 4 years ago.

thank you for your answer.

I am fine with 2012 tax return. but During 2011, he has never been to US and just invested in the company as LLC single member. The business started to operatae in Jun 2011. For 2011 tax return, he needs to file 1040nr with sch-c.

 

One more question, dose he have any legal and tax problem if he receicves w-2 issued by his own company ( LLC sole prop type) ? I understatns that those have same tax effect on him. but he needs to have W2. thanks in avance

Expert:  Lev replied 4 years ago.
The business started to operate in Jun 2011. For 2011 tax return, he needs to file 1040nr with sch-c.

In this case - you are correct - schedule C for business income and expenses and 1040NR because he was a nonresident alien in 2011.

One more question, dose he have any legal and tax problem if he receives w-2 issued by his own company ( LLC sole prop type) ?

LLC for federal tax purposes - unless specifically selected otherwise - is disregarded entity - all income and expenses are reported as you already mentioned on the individual tax return. The net business income is self-employment income - subject for both income and self-employment taxes. There is no wages involved and the owner of LLC doesn't issue W2 form.

Let me know if you need any clarification this matter.

 

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