H1b, EAD card (S-corp or LLC) with a USC partner

[ndp125]

Hi,
I have read up a bit on S-corp and LLC hwoever, not very clear on what would be best for me.

I (applied for EAD card, pending GC stuck in name check ) and my wife are planning to start a company as consultants. We already had few projects last year and figured running this through a company would be more beneficial tax wise as well give a more formal appeal to our clients.

Keeping this in mind we are considering S-corp as it has more flexibility in changing the partner's share in the company as well as makes it easier to add another partner in the future.
Also S-crop is cheaper to maintain and start compared to LLC

These are the only primary differences I am aware off between S-corp and LLC

Is this correct ?

Please let me know if you differ in opinion.
I am currently on H1b, I have applied for EAD card while my name check is pending. I also intend to be a partner in S-corp is that a problem IF
1) I am on H1b
2) If I am on H1b in current company and get my EAD card on the basis of which I become a partner (maybe at a 5% company share)

 

[laborvisalaw]

ndp125-

First, if your only consideration is ease of adding another partner in the future to your company, LLC allows you to do so equally easy as an S-corp. Also, I am not sure that LLC is more expensive to maintain than an S-corp. You should check your state's busienss and corporate laws but generally LLCs are easy to form and maintain. Also, the C-corp and LLC have generally the same tax treatment. One thing that you should note is that S-corps are limited to U.S. citizens or legal permanent residents (LPRs). Since you have not received your approval yet, you are technically a LPR and you should not go for an S-corp.

Second, while H-1B allows you to be an investor in a company, it does not allow you to work for anyone other than the company sponsoring your H-1B visa. USCIS interprets "work" broadly so in all likelihood you will not be able to do any active type of work for the company on H-1B visa. Also, once you receive your EAD and you start using it (to work for a company for example) then your H-1B status gets invalidated.

Based on the above, I would like to caution you on starting a company before you have your EAD. This may create headaches for you in the future.

 

[Dallas03096]

Also, the C-corp and LLC have generally the same tax treatment.

This is true only if the LLCs choose to be treated like a Corporation by filing Form 8832 to IRS. This has the disadvantage of double taxation!

Most multi-member LLCs file partnership return in Form 1065. In this case,
LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

One thing that you should note is that S-corps are limited to U.S. citizens or legal permanent residents (LPRs). Since you have not received your approval yet, you are NOT technically a LPR and you should not go for an S-corp.

I was also under the same impression but there are other members in this forum who say it is possible to incorporate S-Corp when you are on EAD. Please see this thread: http://boards.immigration.com/showthread.php?t=265686