Green Card Starting LLC with H1B

[openwheels 0]

I started a LLC as a Green Card holder. I have couple of my friends who are in H1B Visa. I would like to make them as member of the company and share profits and losses at 33% each. I have the following questions,

1. I would like to know if they could legally be a member of the company.

2. They will not sign any documents or checks on behalf of the company but should be able to take profits and losses and account it in their W2

3. Can they work part time say 5 to 10 hrs per week?

4. If they cannot be a member of the company legally, how can I make them part of profits and losses @ 33% each.

[aaron2020 11,651]

You need to talk to a CPA. Then, you need to talk to a business attorney. I have not looked specifically at H1b visa holders owning an LLC.

1. Yes, H1b visa holders can legally own an LLC. Ownership in an LLC is like owning a stock. It's perfectly okay. However, there are very specific tax rules for non-resident alien owners. An H1b may be subject to those rules. If the owner losses H1b visa status and is not a USC or LPR, then the LLC is absolutely subject to the non-resident alien rules.

2. They can be silent LLC members. You can remain as the only managing member with sole authority to sign documents and checks for the LLC. They cannot take their profits and losses on their employers' W2s. The LLC would need to issue K-1 on the profits and losses to each member.

3. Absolutely not. As H1b visa holders, they can only work for their sponsoring employers. They cannot work for anyone, including themselves. They are not authorize to work for anyone but their H1b employers. Working for your LLC even if no money changes hands would be a violation of their H1b status. Working for an LLC where they are members would also be a violation of their H1b visas.

4. Not an issue since they can be members. If you are the only member of the LLC, then you cannot share profits and losses with anyone. The profits and losses can only be booked to the LLC members. It would be fraud for you to share profits and losses with them when they are not LLC members. As the sole member, all the profits are taxable to you and all the losses will be yours for tax purposes.

Edited August 23, 2013 by aaron2020

[Harsh_77 718]

Yep you need to talk to CPA and Attorney but from what I understand, your friend with H1b cannot be the partner nor owner but just plain investor.

They cannot work in your company part-time or full time, they can only work for the employeer who owns the H1B.

You can give them their share as return on investment in the company.

Edited August 23, 2013 by Harsh_77

[aaron2020 11,651]

Yep you need to talk to CPA and Attorney but from what I understand, your friend with H1b cannot be the partner nor owner but just plain investor.

They cannot work in your company part-time or full time, they can only work for the employeer who owns the H1B.

You can give them their share as return on investment in the company.

The term is "member" for an owner of an LLC. There are no partners or plain investors in an LLC.

Anyone with an investment in an LLC is a member.

He cannot give them "their share as return on investments in the company" unless they are members.

To share in the profits and losses of the LLC, their investments would make them capital members.

Any work done by the H1b visa holders for the LLC would be a violation of their H1b status. Even if they are volunteering without pay and have no financial interest in the LLC, any work done by them violates their H1b status.

[openwheels 0]

Thanks for all the response.

Aaron2020 just to say I understood right, I can still have them (H1B Person's) as member of the LLC and make them 33% share holder each leagally.

If they do not work for the LLC, then they are good and they can still enjoy the profits as members for which they will have to pay taxes end of year.

[Harsh_77 718]

The term is "member" for an owner of an LLC. There are no partners or plain investors in an LLC.

Anyone with an investment in an LLC is a member.

He cannot give them "their share as return on investments in the company" unless they are members.

To share in the profits and losses of the LLC, their investments would make them capital members.

Any work done by the H1b visa holders for the LLC would be a violation of their H1b status. Even if they are volunteering without pay and have no financial interest in the LLC, any work done by them violates their H1b status.

I guess so if they are inverstor they become member... prob like sleeping partner and all they have is funds invested in there.

Yep I agree they cannot work for the LLC not even as volunter as they do have financial interest in the LLC.

[aaron2020 11,651]

Thanks for all the response.

Aaron2020 just to say I understood right, I can still have them (H1B Person's) as member of the LLC and make them 33% share holder each leagally.

If they do not work for the LLC, then they are good and they can still enjoy the profits as members for which they will have to pay taxes end of year.

Correct.

However, you may be subject to the non-resident alien rules. These rules are not fun to deal with.

Unless you have no other choice, you are creating a giant headache for yourself and your friends.

If your friends ever become non-resident aliens, you will have big compliance issues.

Furthermore, the income from the LLC will be scrutinize by US immigration. If they need to send in a tax return that lists the K-1, then USCIS may suspect them of working illegally outside of their H1b visa.

You should talk to a CPA and business lawyer.

Because of the potential headaches for you and your friends, you may want to rethink your plan.

[aaron2020 11,651]

I guess so if they are inverstor they become member... prob like sleeping partner and all they have is funds invested in there.

Yep I agree they cannot work for the LLC not even as volunter as they do have financial interest in the LLC.

Never heard of the term "sleeping partner." Do you mean silent partner?

The equivalent of a "silent partner" in an LLP is a "non-managing member" in an LLC.

Even if they did not have a financial interest in the LLC, they cannot volunteer. No matter what the financial agreement, any effort on their parts is unauthorized work.

[Harsh_77 718]

Never heard of the term "sleeping partner." Do you mean silent partner?

The equivalent of a "silent partner" in an LLP is a "non-managing member" in an LLC.

Even if they did not have a financial interest in the LLC, they cannot volunteer. No matter what the financial agreement, any effort on their parts is unauthorized work.

Sleeping Partner is same as Silent Partner.

sleeping partner

n

(Business / Commerce) a partner in a business who does not play an active role, esp one who supplies capital

http://www.thefreedictionary.com/sleeping+partner

By the way you mentioned about non resident alien rule, you mean the LLC would have to abide by them as it has member with H1B or something else.

[aaron2020 11,651]

Sleeping Partner is same as Silent Partner.

sleeping partner

n

(Business / Commerce) a partner in a business who does not play an active role, esp one who supplies capital

http://www.thefreedictionary.com/sleeping+partner

By the way you mentioned about non resident alien rule, you mean the LLC would have to abide by them as it has member with H1B or something else.

Damn the English!!!! Sleeping partner in England. Silent partner in the US. We do not use the term sleeping partner.

H1b status will end. Once his friends return home, they will be nonresident aliens. This would trigger the mandatory withholding rules for nonresident aliens. If the managing member fails to withhold taxes and forward them to the IRS, then he would be liable for them. In my opinion, that is not good business planning or personal financial planning.

Edited August 23, 2013 by aaron2020