Can anyone qualify to own an S-Corporation?

Business Incorporation in Illinois is one of our Accountants in Chicago specialty. That’s why it is very important to know which are the tax savings from operating your ordinary income business under an S-Corp.  However, not everyone is a qualifying shareholder of an S-Corporation.  If you are from a foreign country living here in the U.S. with a ‘Visa’ or ‘Green Card’ it’s critical to know what the rules are.

Here are the two rules that would make you qualify to be a shareholder of an S-Corp.

  1. You need to be a “Resident Alien”, there are a few tests to determine that. 
    1. one is the “Green Card” test; this where the alien actually has to be a lawful permanent resident with a green card (Immigration Form I-551); if you have one of these documents it doesn’t matter how long you’ve been present in the country, you can qualify as an S-Corporation shareholder.  However, if your Visa is a non-immigrant visa, then that would not constitute lawful permanent residence, so you wouldn’t qualify under this test.
    2. b.      or you need to pass the  “Substantial Presence Test”, this test is essentially mathematical, it is satisfied if the alien individual is physically present in the United States for the requisite amount of time, either for the calendar year in question or for the three-year period that ends with the year in question. For purposes of the test, presence during any portion of a day is considered presence for a full day.
    3. The “Substantial Presence Test” is met in either of the following circumstances:
  • The alien is physically present in the United States for 183 days or more during the target calendar year, or
  • He is present in the United States for at least 31 days for the year in question and has been present for 183 days which are the sum of (a) days during the target year counted as full days, plus (b) days in the first preceding year counted as one-third days, plus (c) days in the second preceding year counted as one-sixth days.

In sum, if you have a ‘Green Card”, if you have been living in the U.S. for 183 days or more during the calendar year, then you would meet this test and be eligible to be a shareholder of an S-Corp.  Remember you need to continue to meet this test every year until you actually get the “Green Card”. Sounds easy right?

For more questions regarding Business Incorporation in Illinois you can call us at 773-728-1500.