What types of foreigners can own
a U.S. S-Corporation?
The short answer is yes, a “foreigner” can own an S-Corp (also known as an S-Corporation), but it depends on what type of foreigner.
If you look on the main S-Corporation page of the IRS website, they briefly state, “To qualify for S-Corporation status, the corporation must meet the following requirements: May not be partnerships, corporations or non-resident alien shareholders.”
This is not very helpful since not all foreigners understand what a non-resident alien is, and the “who can own S-Corp” could be expanded on.
Note: An S-Corporation owner is the same thing as an S-Corporation shareholder.
Non-resident alien (aka non-US resident)
A foreigner that is a non-resident alien cannot own an S-Corp.
As per the IRS, a non-resident alien is an individual who is not a US citizen or a US resident alien.
Note: Another word used for non-resident alien is non-US resident.
US resident alien
A foreigner that is a US resident alien can own an S-Corp.
As per the IRS, a US resident alien is an individual that is not a US citizen or US national and who meets either “the green card test” or “the substantial presence test” for each calendar year.
Keep in mind: You will need to maintain your US Resident Alien Status for many years. Meaning, it’s not a one-time requirement to in order to be an S-Corporation owner. You must always be a US Resident Alien in order to keep the S-Corporation in compliance with IRS rules. If you don’t maintain this status, the IRS will not honor your S-Corporation election.
Simplified
The following people can own an S-Corporation:
- US citizens
- US residents
The following people can’t own an S-Corporation:
- non-resident aliens (non-US residents)
References
https://www.law.cornell.edu/uscode/text/26/1361
https://www.law.cornell.edu/uscode/text/26/7701
https://www.irs.gov/forms-pubs/about-publication-519
https://www.irs.gov/individuals/international-taxpayers/nra-withholding
https://www.irs.gov/individuals/international-taxpayers/foreign-persons
https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
https://www.irs.gov/individuals/international-taxpayers/alien-residency-green-card-test
https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
I am on h4 ead and been in us since many years on multiple visas. I was in US for entire year last year and continue to be. Can I open a llc and apply for s-corp? I read a comment above irs denied their s corp application. Why would that be?
Hi Matt, thank you for this article. I applied for s corp election and irs sent me a letter stating I wasn’t accepted because of the shareholder (me) is a nonresident alien. So, I understand a foreigner can own an s corp after reading your article. Did I have to file something else/other form to demonstrate “the substantial presence test”? I filed my taxes as self-employed for a few years and then 2 years ago I registered by single member llc and file taxes as well. I hope you can read my comment. I have asked some tax preparers but they keep telling me s corp is only for us citizens and permanent resident card holders. Thank you so much for your help. I’m glad I found your website.
Hi Matt, hope you are well.
My question is :
Is SECA (15.3%) the only tax paid by LLC business owner or there are some other taxes like federal income tax etc also to be paid in plain LLC ? If yes what are those taxes other than self employment tax?
Regards !
Hi Matt, I am legal alien (us resident) and currently run my business as a sole proprietor. I am in the process of creating a LLC this month. Because travel business is very low, I cannot yet comply with the requirement of an S-Corp to pay myself a salary from the profit as we might not have any. Can I still create the S-Corporation in a following year?
Your responds is much appreciated.
Happy New Year! Ilja
Hi Ilja, yes, you don’t have to elect S-Corp tax treatment right away. You make the election at any time in the future. Hope that helps.
Short and simple, I like it! Thank you
You’re welcome :)
Hi Joe,
Can a US citizen who is a resident internationally own an S-Corp? If so, how to the tax distributions work if the non resident pays higher taxes abroad?
Thank you
Hi Joe, yes, a US citizen can own an S-Corporation, regardless of where they reside. Exactly how you’re taxed depends on a number of factors. We recommend speaking with an accountant who works with expatriates.
Hi,
Just want some clarification,
So if I am a foreigner but lives in the uS for the entire year and satisfy the substantial presence test, I can file as a S Corp? Thanks.
Hi Anon, you need to be considered a US Resident Alien for all the years you want to own an S-Corporation. It’s not possible to pass the substantial presence test for just one year, and keep the S-Corporation in compliance for years after that if you don’t maintain your US Resident Alien status. If you don’t maintain this status, the IRS will not honor your S-Corporation election.
Thanks for the response.
So let’s say I’m on a student visa and been in the Us for two years the entire time, I should be able to file as a S Corp? And my s Corp status would be revoked once I’m out of the country?
Hi Anon, yes, correct. The S-Corp election is only valid for as long as you are considered a US resident for tax purposes. Also keep in mind, LLC electing S-Corp taxation is more complicated to setup, maintain, and close down. So you may want to consider the advantages and disadvantages for having an LLC taxed as an S-Corp for a short period of time. If you decide to go this route, you’ll want to have the LLC revoke S-Corp election after you are no longer considered a US resident for tax purposes. Said another way, there are a lot of details involved here and we recommend speaking with an accountant (or a few).
Hi Matt,
I am on H4 EAD. Can I be S corp owner?
Regards,
Hi Nps, you are not a US resident unless you meet “the green card test” or “the substantial presence test”. Just having an H4 Employment Authorization Document (EAD) doesn’t automatically make you a US resident for tax purposes. Said another way, if you are a non-US resident, you cannot own an S-Corporation. Hope that helps.
Hi Matt,
Can a US Citizen, and two non-US Citizen/Foreigners who reside outside the US form an S-Corp?
Regards;
Hi Yasser, no, non-US resident/non-resident aliens cannot be S-Corp owners. Hope that helps.
Hi,
as an resident alien and owner of an LLC s-corp, can I switch my LLC s-corp to a regular LLC to be able to keep it if I were to leave the US?
Thanks
Damian
Hi Damian, if you are talking about reverting a Single-Member LLC back to a disregarded entity, then yes, that can be done. You can find information about that here: LLC revoking S-Corp election with IRS. Hope that helps.
Thanks Matt, I appreciate it!
Best