Can an S-Corp have foreign shareholders? (S-Corp foreign ownership explained)

24 comments on “Can a Foreigner Own an S-Corp?”

1. 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).

2. 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.

3. 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).

4. 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 :)

5. 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.

6. 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).

7. 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.

8. 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.

9. 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

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