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What types of non-US residents can own
an S-Corporation?
The short answer is yes, a non-US resident can own an S-Corp (also known as an S-Corporation), but it depends on what type of resident.
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 foreign shareholders 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
IRS: S Corporations
IRS: Green Card Test
IRS: Tax Guide for Aliens
IRS: Foreign Persons Rules
26 US Code 7701 – Definitions
IRS: Substantial Presence Test
IRS: Non-Resident Alien Withholding
26 US Code 1361 – Definition of S Corp
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.
Hey Matt I have LLC for 3 years am work permit holder (in withholding removal case ) my wife she is US citizen and we need to convert my LLC to S corp I need add my wife on the entity can I add my self we been filling tax return together for 5 years or it’s wast of time I just put my wife name only thanks
Hi Teddy, if you’re not a US resident, you won’t be able to have your LLC taxed as an S-Corp (it would just be taxed as a Partnership after you add your wife).
Hi Matt,
I’m a resident alien and want to change my company to an S-corporation, but my sister is the co-founder and non-resident alien. Is it possible to change to an S-corporation in this case? Thanks
Hi Wayne, no, you can’t have your LLC be taxed as an S-Corp with non-resident alien Members. Hope that helps.
Hi Matt,
My wife is on h4 EAD and she passes the ‘significant presence test’, can she open a ‘S’ corp. The reason I ask is I keep getting conflicting theories saying that only US citizens and GC holders can start the ‘S’ corp
Thanks
TG
Hi TG, please see my recent reply to Jazmin (I believe it’s below).
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 Kishore, I just replied to Jazmin. I don’t know all the details yet as to why she was rejected, however, if you’re considered a “US resident” for tax purposes – and you pass the substantial presence test (without any exceptions or exemptions) – you can elect for your LLC to be taxed like an S-Corp.
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 Jazz,
Where you able to figure out more on this? Did IRS give you any reason why you can’t open S corp in h4 EAD eventhough you pass significant presence test?
I am in the same boat and hence curious
Thanks
TG
Hi Jazmin, as far as our understanding goes, as per the IRS regulations, you can own an S-Corp if you’re considered a “US resident” for tax purposes (which you can be if you pass the substantial presence test). Did the letter from the IRS provide any more details besides just “you’re a non-resident alien”? Also, is there a chance you’re exempt or meet an exception? Both of these are explained here: IRS: Substantial Presence Test (see bottom of the page).
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