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Results 1 to 7 of 7

Thread: EAD card holder under F-1: Start a business

  1. #1
    Hi,

    Here's my situation:
    1) an EAD holder under F1 visa
    2) On OPT (optional practical training) after graduated from Univ.
    3) Currently working as a non-paid intern at State Department
    4) Brainstorming small business ideas with my U.S. citizen girlfriend.

    Due to limited capital, we were thinking of opening up either a food booth within certain zoning in downtown area OR a food booth within an existing food court. FYI, we were only considering opening up an organic yogurt stand -- which I believe the business licensing will be much easier to obtain.

    Here are some of the questions I'd like to get the answers to:

    1) What would be the best thing to do for us when registering and getting a business license entity -- to avoid having to pay more taxes ?
    2) Can you see any potential "hidden" obstacle that we should know ?

    Thank you so much for investing your time in reading my discussion. I hope to hear your feedback and comment soon.

    Regards

  2. #2
    Hi,

    Here's my situation:
    1) an EAD holder under F1 visa
    2) On OPT (optional practical training) after graduated from Univ.
    3) Currently working as a non-paid intern at State Department
    4) Brainstorming small business ideas with my U.S. citizen girlfriend.

    Due to limited capital, we were thinking of opening up either a food booth within certain zoning in downtown area OR a food booth within an existing food court. FYI, we were only considering opening up an organic yogurt stand -- which I believe the business licensing will be much easier to obtain.

    Here are some of the questions I'd like to get the answers to:

    1) What would be the best thing to do for us when registering and getting a business license entity -- to avoid having to pay more taxes ?
    2) Can you see any potential "hidden" obstacle that we should know ?

    Thank you so much for investing your time in reading my discussion. I hope to hear your feedback and comment soon.

    Regards

  3. #3
    YOur first question wold have to be what type of business entity you want to create. First you have sole proprietorship (SP). Under this type of entity, both personal and business assets are intermingled and you may be subject to both income and self employment tax. The second option is partnership with your girlfriend. Both of you would contribute some form of capital in the business. The partnership is a pass through entity. This means you business activity would be reported on a form 1065 with the net income, deductions, and credits passed to each partner according to their share of capital. Assets and liabilities are intermingled like a SP. Then you can form a corporation under the laws of the state. You and any other shareholder will contribute cash in exchange for stock. If the corporation is formed in the U.S., a form 1120. You have to create articles of incorporation. Some legal forms software such as PC attorney, can create very simple articles of corporations. However, the fees can be somewhat excessive. YOu can elect to be a S corporation by filing Form 2553 within the specified time frames, if all the requirements are met. Whether you are a corporation or a S corp, you will have to pay a "reasonable wage" to any officer of the corporation. Thus, the corporation would be subject to the employment taxes. Right now, they may not be met since you may be considered a non resident alien. The chameleon of all this is called an LLC, or limited liability company. IRS does not recognize LLC as a separate business entity, but the IRS does have default rules. If you are a single member LLC, you are treated as a SP. If you are a multi-member LLC, more than one member, then you are treated as a partnership. In either case, you can elect to be treated as a Corporation or a S Corp.

    However, no matter which business entity you choose, you will need to change your visa status from F1 to something that would allow you to stay longer. If you go back home to your country and continue the business, there may be additional requirements for the business entity to submit to such as Form 5472 or Form 8804 and Form 8805.

    Each business entity has both advantages and disadvantages. If you want something simple, SP may be the way to go and you may have to pay higher taxes. However, corporations can be more complicated and your tax savings may be eaten up by the accountant fees. Your best bet is to talk this over with your girlfriend and a qualified professional to see what your short term and long term goals are.
    "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence." John Adams on Defense of the boston Massacre

  4. #4
    Dear Hudson,

    Thank you for your kind and thorough response. It was part of my plan in making a decision to just open up a business under my girl friend's name and that I will be working for her as a volunteer. With this plan, I hope that although she / the business has to pay more taxes but at least is better off since me and my gf are considered as a "single entity", financially.

    For my long term goal, I want to financially support myself to pay a lawyer in order to change my visa to an H-1 working visa since I will still be working for federal state. My hope is to use our profit from the business to help me with the financial needs in paying all the expenses to change my visa status once my f1 expires.

    Tell me what you think about this idea.

    Again, I really appreciate your generous help in answering my questions.

    Regards

  5. #5
    Your welcome empire.

    The key in your plan would be which employer would sponsor you for the H-1b. If the employer is the one you and your gf has started, I would suggest a LLC and elect to be a corporation or S-Corp with her as the sole owner. When you obtain your work visa or green card, you can be added as another member/owner of the S-Corp. This could work even if you are being contracted to the Federal government.

    If the employer is going to be someone else, then the current business entity would be sufficient.
    "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence." John Adams on Defense of the boston Massacre

  6. #6
    Thank you Hudson. May your kindness be rewarded.

    - warm regards

  7. #7
    Its not that easy. The business also has to prove that they have put ads in publications seeking Americans who an do the job but could not find them that is why you are being sponsored under H-1B to do the job. And according to the job description you described, I don;t think it is such a hard job so as not to find local talent for it. You really need to research this idea before investing resources, it will require good documentation of reason for such a filing. This usually works for software companies and other very high technically inclined jobs because they cannot find anyone to do it locally so they end up importing developers and other technical people from abroad and at great wages, etc.

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