0

If there is a startup consists of citizen/resident and international(non-citizen/non-resident) students in the US who they want to create a company and get funding from investors, can they using S-Corp tax advantages for their LLC or is there any option like a S-Corp for reducing their tax or not?

2
  • 1
    @Harper-ReinstateMonica: for Federal tax LLC is passthrough by default but can elect S-corp (if eligible) or C-corp treatment. But S-corp rules don't allow nonresident alien owners/holders. Also note alien students generally aren't authorized to work (for pay) other than OPT arranged by the school (that's immigration rather than tax). Jun 20, 2021 at 2:26
  • @dave_thompson_085: Thank you, but the work would be unpaid and the important thing is holding a share of the company for him. So you mean there is no option for such startup to use advantage of S-Corp taxation? Can't citizen members treat their profit as S-Corp and non-citizen/residents as usual LLC? Or there is no other same/similar option for such company at all?
    – user109157
    Jun 20, 2021 at 17:46

2 Answers 2

1

An LLC with two members can be taxed as a partnership, A C-corp or an S-corp. Whatever you choose, it applies to the LLC as a whole so the different members cannot choose different taxation.

Pass-through taxation is pretty good because it avoids double taxation (both corporate and personal). That is probably a better option than C-corp but you'll need an accountant to go through the details. As noted in the comment, you can't do S-corp.

0

An S-Corp cannot have non-resident shareholders. So no, if your LLC includes non-residents it cannot elect to be treated as an S-Corp.

To be treated as an S-Corp, a disregarded entity must satisfy all the requirements of eligibility under Sub-Chapter S, excluding incorporation.

See 26 CFR 301.7701-3, IRC Sec 1361, and IRC Sec 1362.

The S election applies to the entity, not to the individual shareholders.

You must log in to answer this question.