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

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I am a non-us citizen...
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: 10 months ago.Category: Tax
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8/14/2017
Tax Professional: Lev, Tax Advisor replied 10 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,977
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 10 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 10 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 10 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 10 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 10 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 10 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 10 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 10 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 10 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 10 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 10 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 10 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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