Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.A bank account can be opened for the business and business and personal should always be separate. Earning a profit is important and reporting the income either as a resident alien (if you have been in the US for the time required) or as a nonresident alien if you have not resided in the US.
Tax and immigration are different.
You are required to report all income you earn from a US source but can you have a business as an H1B VISA holder is really an immigration issue.
Most advice is your H1B visa is ONLY good for employment by your sponsor.
As a partner you would not be an employee. Partners are given K1s that show their portion of profits from the business.
You would be required to report your share of the income in the partnership for tax purposes.
Please respond below before you rate if you need more tax information on your situation.
Could you please explain what are K1s?
K1s are the reports that are sent to each partner. The K1 shows the portion of the expenses and the income that the parner claims on their tax return
A partnership is a pass through entity
it does not pay taxes
it passes the income to teh partners and they pay tax
Ok. so in my case, both of us will receive separate K1, right?
Once I receive my K1, can I legally show it on my tax filing and how?
Yes, to not report would be illegal
The K1 has different types of income but most are carried to a Schedule E
ok. got it :) Is there any agreement needs to be done between me and my partner? And who generates K1?
The partnership generates the K1 so whoever handles the reporting and finances would complete the forms for the partnership
If this is an LLC or you actually have a partnership agreement then this all should be spelled out in what percentage you each hold
I understand that being on H1B visa, I will be a silent partner and will not do any work for this company. But, if I show profit as my income in the tax, would that be any problem with my visa?
Again that is an immigration and not tax problem. I would suggest you relook at the answer from Sam in your other question. You can always follow up with her on the immigration part. I am happy to answer your tax parts.
Are you a resident alien yet or are you still nonresident?
Sure, I understand. I follow up with her on that. Regarding bank account, if I have a joint account with my partner, would that be fine? and if we are earning any interests in combined, can we show that as well?
The partnership should have it's own account with each of you as authority. Yes the interest would pass to each of you.
If this is an LLC then having 2 members makes it a partnership. If you are a resident alien you can even request to be S corp. It's a pass through too and you would receive a K1. Your partner would have to take a salary and they woudl then receive a W2 and a K1.
I hope our CHAT was useful
yes, I am surely getting more clarity on this. And the company type we are thinking of is LLC.
I am more than glad to help
You can always come back to this thread even after you rate.
sure. thanks for your help. I might want to reach you again in future if I have any questions. Thanks again.
You are most welcome