I have a business idea and go to school in the US. I am wondering if I tell my trusted friend my idea and he opens the business under his name (he is a US citizen) and I invest 50 percent of capital into the business. How can he pay me ? Dividends? I understand that in order for it to be passive income I cannot take part in any business actions. But I have read that dividends and investments count as passive income which does not require a work visa?
*Disclaimer: I am a tax accountant , but I am not your professional accountant or advocate (unless you have been in my office and signed a contract). This communication is not intended as tax advice, and no tax accountant / client relationship results. *Please consult your own tax accountant for tax advise.**
A foreign citizen may form a limited liability company. In contrast, all profit distributions (called dividends) made by a C corporation are subject to double taxation. (Under US tax law, a nonresident alien may own shares in a C corporation, but may not own any shares in an S corporation.) For this reason, many foreign citizens form a limited liability company (LLC) instead of a C corporation
A foreign citizen may be a corporate officer and/or director, but may not work/take part in any business decisions in the United States or receive a salary or compensation for services provided in the United States unless the foreign citizen has a work permit (either a green card or a special visa) issued by the United States.
Basically, you should be looking at benefiting only from dividends/pass-through income but not salaries or compensations.
The real question you're asking is how you can work for your business.
You cannot. Whether your "friend" pays you or not is entirely irrelevant.
Claiming your work-related earnings as interest/dividend will make it also a tax fraud, in addition to the immigration violation (i.e.: not only deportation but also potentially jail time).