Starting a Business Partnership with a Foreign National Living Outside the United States
Question: I am in a process of starting a partnership/LLC. One of the potential partners is a nonresident without a green card (in the process of getting one). Can we form an LLC prior to the non-resident obtaining a green card?
Answer: Generally, there is no restriction in state LLC laws that limit who can form a limited liability company or who can own a membership interest in an LLC. A non-resident of the U.S. is free to form an LLC under the laws of any state he chooses. Similarly, an entity based outside the U.S. may form and own a limited liability company in the United States.
Further, there is no requirement that the activities of the LLC be managed from within the United States or even that its activities be conducted within the United States. A foreign individual can form and operate his LLC from wherever he happens to be.
Although a non-resident of the U.S. can form and own an LLC generally, there are some restrictions on ownership of certain entities under various state laws that may restrict ownership for reasons other than citizenship or residency. For example, state law may require that all members of an LLC engaging in the practice of medicine be licensed physicians in that state or all members of an LLC engaging in the practice of law be licensed attorneys.
If there is one drawback to forming an LLC with a non-US resident, it is that you can’t elect for your LLC to be treated as an S corporation to reduce your tax burden. This is a feature that US citizens and Residents Aliens or U.S Persons for tax purposes can take advantage of, BUT Non-Resident Aliens do not qualify for S corp ownership -See Section 1361(b)(1)(C)
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***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**