Owning an S-Corporation as an F1 Student is perfectly legal; however, there are certain limitations that need to be taken into account and specific requirements that must be met. In this article, you will learn what you need to know about owning an S-Corporation as an F1 Student directly from an experienced Florida Business & Immigration Lawyer.
Owning an S-Corporation as an F1 Student – What You Need to Know
Both permanent residents and U.S. citizens have the legal right to own any kind of business in the United States. By default, Limited Liability Companies (LLCs) are taxed as disregarded entities, meaning they only pay taxes once, as they do not have to pay a corporate tax. However, the owners of an LLC can also choose to pay taxes as a C-Corporation or an S-Corporation. Similarly, corporations are taxed as a C-Corporation by default but can choose to pay taxes as an S-Corporation.
F1 students can generally own businesses taxed as disregarded entities or corporations taxed as C-Corporations as long as they do not work for their company for more than 20 hours a week.
Now, when it comes to owning an S-Corporation as an F1 student, things get a little trickier. As mentioned above, it is legal for an F1 student to own an S-Corporation; however, certain limitations apply.
An F1 visa holder can own a business that elects to pay taxes as an S-Corporation by either 1) becoming a permanent resident in the United States, or 2) establishing a substantial presence in the country.
Becoming a Permanent Resident in the United States
Anyone who is a permanent resident in the United States with a
can own a corporation that pays taxes as an S-Corporation. Once an F1 student obtains a green card, that student is no longer an “alien,” which means that, for taxation purposes, there are no restrictions on what type of business entities they are allowed to own. In other words, this status in the United States gives the student the right to own a business that pays taxes in any of the available ways.
Establishing a Substantial Presence in the United States
To own a corporation that pays taxes as an S-Corporation, an F1 student can also establish a substantial presence in the United States. An alien individual satisfies the requirements for establishing a substantial presence in the United States if they have been present in the country for at least 183 days during a three-year period that includes the current year. Each day of presence in the United States during the current year is counted as a full day, any day of presence in the country during the first preceding year is counted as a third of a day, and any day of presence during the second preceding year is counted as a sixth of a day.
In order to maintain the benefits of S-Corporation taxation, however, an F1 student must establish this substantial presence in the country every year.
Are You an F1 Student Looking to Start a Business in the United States? Work with Attorney Romy B. Jurado, Esq.
As you can see, although there are certain limitations, owning an S-Corporation as an F1 student is perfectly legal. As long as you are able to meet the requirements mentioned above, you will be able to make your entrepreneurial dreams come true. However, starting a business is not easy, and it is much harder if you are a student, as your mind will need to be aiming at two different targets at the same time – school and your business. This can be overwhelming, so working with an experienced business attorney is vital.
If you are an international student with a dream to start your own company here in the states, give Attorney Romy B. Jurado a call today at (305) 921-0440 or send an email to Romy@jflawfirm.com to schedule an initial consultation.