{"id":226,"date":"2015-06-24T22:00:47","date_gmt":"2015-06-25T02:00:47","guid":{"rendered":"https:\/\/ogtax.wpengine.com\/?p=136"},"modified":"2023-02-24T07:17:11","modified_gmt":"2023-02-24T07:17:11","slug":"treaty-investor-incorporation-and-personal-taxes","status":"publish","type":"post","link":"https:\/\/oandgaccounting.com\/staging\/treaty-investor-incorporation-and-personal-taxes\/","title":{"rendered":"Treaty Investor, Incorporation and Personal Taxes"},"content":{"rendered":"

QUESTION:<\/strong> I am a treaty investor from Romania who has a wife and 2 children here in the US. I have a single member LLC, which is a holding company for 2 sole proprietorships. 1. Can the LLC elect to be treated as an SCorp? 2. How do I file the 2 sole proprietorships and combine them for the LLC? 3. Also, I\u2019m I able to get a SSN or ITIN for my 2 children so I can claim them as dependents?<\/p>\n

ANSWER: <\/strong><\/p>\n

1. Can the LLC elect to be treated as an SCorp?<\/strong> Generally, LLC can elect to be treated and taxed as S corp, but as a foreign owner holding a non-immigrant visa such as a Treaty Investor visa would disqualify you from electing your LLC as S corp. The tax code provides that a S-Corporation must not have a nonresident alien as a shareholder (see, IRC Section 1361(b)(1)(C)). Treasury Regulation Section 1.1361-1 states that \u201ca corporation having a shareholder who is a \u2018nonresident alien\u2019 as defined in Section 7701(b)(1)(B) does not qualify as a small business corporation.\u201d Section 7701(b)(1)(B) provides \u2014 in typical IRC legalese \u2014 that a person is a nonresident alien if he isn\u2019t a resident alien. Having a particular visa has no impact on whether a non-resident alien can be a S-corporation shareholder. Only a green card or meeting the IRS \u201csubstantial presence test\u201d enables an alien to be eligible to be an S Corporation shareholder. Assuming you qualify to be treated as a resident for tax purposes after passing the Substantial presence test, the tax code permits you to be a shareholder of S-corporation. I do not suggest it, because a foreigner who does not stay in the country long enough during a particular year can inadvertently cause the corporation to lose its status as a S-corporation. This can cause disastrous and unfair tax consequences to your newly elected S corp. Section 7701(b) and the implementing Treasury Regulations (i.e., Section 301.7701(b)-1) provides that to be a resident alien (and thus an eligible S corporation shareholder) one either has to have a green card or meet the substantial presence test by being in the US for at least 183 days during a three year period that includes the current year. This is the only area where having a certain visa may be relevant. Section 7701(b)(3)(D)(i) provides that an individual shall not be treated as being present in the US on any day if such individual is an exempt individual. Section 7701(b)(5) defines exempt individuals as those who are a foreign government-related individuals (including those temporarily present in the US on a visa which the IRS determines represents full-time diplomatic or consular status), teachers, trainees, students or professional athletes temporarily in the US to compete in a charitable sports event. Thus, the visa classification of these types of individuals could, actually, hinder them meeting the substantial presence test.<\/p>\n

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