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I am a non-us citizen. I am currently staying in US under

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OPT up to 3 years...
I am a non-us citizen. I am currently staying in US under OPT up to 3 years. I want to form a company in the the state of Delaware now. What is my tax implication as a non-us citizen while I am in the US and outside of the US when I leave in 3 years? Which entity is better for me in in terms of saving tax, LLC or C-Corp? Do I have to declare any income that is from outside of US?
Submitted: 3 months ago.Category: Tax
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8/14/2017
Tax Professional: Lev, Tax Advisor replied 3 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,159
Experience: Taxes, Immigration, Labor Relations
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Just having the business entity - either corporation or LLC would not make any difference.

If you will start business activities - your income and corresponding deductions will be reported on your income tax return. As long as there is no positive income - there will not be any tax consequences besides reporting requirements.

When there will be positive business income - that income will be taxable.

While you are in the US on F1 visa with OPT extension - being involved into self-employment business activity would be likely violation of your visa terms. As a result - the IRS might consider you a resident alien for tax purposes.

When you have C-corporation - income would be received by teh corporation - not by you - and teh corporation will file its own tax return.

The LLC would be disregarded for income tax purposes - and all income is considered as yours.

As a resident alien - you would be taxed on ALL your worldwide income regarding if it comes from teh US or from abroad.

.

After you become a nonresident alien by moving abroad - the tax treatment will be similar

But as a nonresident alien - you would be taxed ONLY on income from US sources.

For C-corporation - it is always considered as US entity - and would be taxed on ALL its worldwide income.

Let me know if any clarification needed.

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Customer reply replied 3 months ago
Thanks for your response. Why would I violate my visa terms? From my research, students on OPT can open their own business and be self-employed. Quote"Self-employed business owner. A student on OPT may start a
business and be self-employed. The student must be able to prove that he or she has the proper business licenses and is actively
engaged in a business related to the student’s degree program. " can you please confirm if I misunderstood?
Customer reply replied 3 months ago
When I consider personal employment and taxation rather than company taxation, after I move abroad what are the implications of incorporating a c-corp vs LLC?Can a c-corp employ a non-resident alien is there a withholding tax?Is my personal tax liability to the US the same with both business entity types?
Tax Professional: Lev, Tax Advisor replied 3 months ago

Everything you said is correct - it is possible to be self-employed while on OPT.
But that self-employment activity must be authorized by immigration authorizes.

You would need to provide all supporting documents mentioned in your statement - and apply for authorization before starting self-employment activity.

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Tax Professional: Lev, Tax Advisor replied 3 months ago

after I move abroad what are the implications of incorporating a c-corp vs LLC?

C-corporation is separate taxing entity - it files its own tax return and pays corporate income taxes.

The LLC generally is disregarded and all income is considered as received by teh owner - as if there were no any LLC.

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Tax Professional: Lev, Tax Advisor replied 3 months ago

Can a c-corp employ a non-resident alien is there a withholding tax?

Yes - C-corporation may have employees.

Generally - wages paid to employees are subject to social security and Medicare taxes and income tax withholding.

C-corporation may also run business in a foreign country and have employees there.

In this case we need to consider employment laws of that country.

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Tax Professional: Lev, Tax Advisor replied 3 months ago

Is my personal tax liability to the US the same with both business entity types?

Your personal tax liability is based on YOUR income.

With LLC - which is generally disregarded - all income is considered as yours.

With C-corporation - your income will be from wages and from dividends paid out from C-corporation.

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Customer reply replied 3 months ago
Thanks. If I move abroad after my OPT finishes and continue to receive a salary from the company, can that salary be written off 100% as a business expense?
Tax Professional: Lev, Tax Advisor replied 3 months ago

For C-corporation - yes - that will be business expense and will be deducted.

For you personally - that will be taxable wages.

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Customer reply replied 3 months ago
If I live abroad and I don't have US working permit, can I still work and draw salary from a US company?
Tax Professional: Lev, Tax Advisor replied 3 months ago

Yes - but we need to consider where your workplace is located?
If that workplace is located abroad - C-corporation must follow employment law in your country.

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Customer reply replied 3 months ago
If I form LLC as a nonresident alien, and continue doing business with other countries using US LLC, I don't have to pay tax on the non-US sources ? Whereas C-corp does?
Tax Professional: Lev, Tax Advisor replied 3 months ago

I have to repeat myself...
A single member LLC is disregarded - means ignored - for income tax purposes.

If you are doing business as a physical person without any LLC or if you run business activities via the LLC make NO difference for income tax purposes.

That is regardless if you are a resident alien or a nonresident alien.

C-corporation is a separate entity for income tax purposes - it files corporate income tax return and pays corporate income tax on net business income (after deductions).

Another issue - how income of nonresident aliens is taxed? Nonresident aliens are taxed ONLY on income from US sources.

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