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Starting a Consultancy

Discussion in 'Start up company issues' started by pdevarapu, Jan 5, 2011.

  1. pdevarapu

    pdevarapu Junior Member

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    Hi Ron

    This question has been asked number times in this forum, but im taking it a bit further in terms of taxes and future work for our own company

    Along with a couple of friends I'm thinking about starting a consulting company. 1 of us has a EAD and the other 2 are on H1B.

    1. Is there a problem in getting into this venture with none of us being GC Holders, or should we rope in a GC holder or a US Citizen?
    2. we expect to turn some profit fairly quickly, the 2 of us on H1 though will not actively work will derive a share of the profits.(Assuming we register as an LLC, we would have to report this in our taxes) is that a problem in terms of future/Pending Green Card Application?
    3. At some point with we be able to apply for a H1 for ourselves so that we can actively work for our own company?
    4. At some point in the next 2-3 years can we apply for a green card for ourselves using our company(Again assumption being we will be partners not involved in any decision making)

    Thanks in Advance
     
  2. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Re: Starting a Consultancy

    There is nothing to prevent you from owning a business in the US, irrespective of your visa category. You may not do any work for that business, however, unless you have a visa that allows you to do so. If you are in H status, and want to work for your own company, the CIS will allow this, provided you can prove that the company will continue to do business after you leave the US. Unfortunately, the DOL will not allow your company to sponsor you for a labor certification (PERM). Perhaps Roy can add his thoughts as to the tax issues that may be present?
     
  3. Roy Vargis

    Roy Vargis Super Moderator

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    Re: Starting a Consultancy

    You could start your own company while you are on a nonimmigrant status say H1B. However you would not be able to work for the company you incorporate unless you have approved H1B with that Company. You can hire employees to manage the company.

    Be careful on the type of business structure you would incorporate. The S Corp status seems promising for many, which avoids double taxation unlike C Corporation.

    For an nonimmigrant, the S Corp may not be suitable. In order for an S Corp status to be maintained, all shareholders should be residents in US for tax purpose. An H1B/F1 will be considered as an resident upon their stay in US for 183 days or more (substantial presense test). However if the nonimmigrant travels abroad for an extended time, the H1/F1 could become a nonresident and this will lead to S Corp status be revoked.

    Once the S Corp status is revoked, the company will have to wait for 5 years to reapply for the status.

    As a CPA firm, we can assist you further on any questions you may have in this regard. Contact us at the phone number/email in the signature below.
     
  4. pdevarapu

    pdevarapu Junior Member

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    Re: Starting a Consultancy

    Ron/Roy

    Thanks for the response. certainly helps a lot.

    Roy i looked at your other thread differentiating between the types of corporations. i do not see much of a difference between an LLC or a S-corp. Is there a drawback to registering as an LLC instead of as a S-corp.

    Thanks
     
  5. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Re: Starting a Consultancy

    Speaking strictly from the legal perspective, I think that an LLC is the far better choice. An S corp is still a corporation. You are required to observe all corporate formalities - which most people never do. If you fail to observe these formalities, and someone sues you, they can ask the court to disregard the corporate entity and hold you personally liable. This problem does not exist in the case of an LLC, where there are no real formalities to observe.
     
  6. Roy Vargis

    Roy Vargis Super Moderator

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    Re: Starting a Consultancy

    I see more advantages of registering an LLC than an S Corp.

    to name a few..
    - As Ron mentioned, lesser formalities as compared to an S Corp.
    - LLC can have another company as a shareholder unlike S Corp.
    - LLC members/shareholders do not have to residents in US
    - LLC avoids the double taxation like an S Corp.
    - Unlimited number of members/shareholders unlike an S Corp.
    - LLC has more flexibility in distribution of profits.

    IF YOU ARE AN ONE MEMBER LLC, You will be at a disadvantage. If this is your situation, give me a call and we can discuss.
     
  7. swap822

    swap822 Junior Member

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    Re: Starting a Consultancy

    Hello Ron,

    I have few questions related to start an LLC on H1-B Status & we contacted "The Kushner Law Firm" as per your suggestion on another thread but still ended up our conversation with few more questions on top our head. Let me explain more clear about our situation.

    Me & 2 other people are planning to start an entity(LLC). We 3 are working different organizations on H1-B so they confirm us saying we are legally eligible to start LLC on H1B but still we got few questions as below.

    1) If we are legally eligible to start LLC on H1-B then how we can takeout the profit money from the company at the end of the year as We 3 or working on H1-B, as we are on H1-B we are not supposed work for any other organization.

    2) Another question we didn't get answer If we are planning to start LLC with 2 Partners where one of them is US citizen & another partner will be staying in India , in that case is it possible to share the profits with person who lives in india.

    It would be really helpful for us if you provide any suggestion for our situation.

    Thanks
     
  8. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Re: Starting a Consultancy

    You need to consult with an accountant on those questions. Perhaps Roy can answer this?
     
  9. swap822

    swap822 Junior Member

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    Re: Starting a Consultancy

    Hi Ron,

    Thanks For your quick response. Is there any immigration related issues as we are H1-B when we try to include one more Partner(Us Citizen) introduce into our entity & becoming 4 of us as Equal Partners.


    Thanks
     
  10. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Re: Starting a Consultancy

    Any time the beneficiary of an H petition owns an equity interest in the sponsoring company, the USCIS is going to take a very careful look at all of the facts. Until very recently, foreign national ownership of the business was the kiss of death for an H1B petition. Now, it isn't quite that bad but it is still a serious issue.
     
  11. Canuck

    Canuck Junior Member

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    I have a similar question regarding establishing an LLC but while on a TN Visa. Am I able to register an LLC while on a TN Visa? Am I able to receive dividends from the company at the end of the year? Thanks.
     
  12. Ron Gotcher

    Ron Gotcher Attorney at Law

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    Anyone, on any type of visa, may form a company and receive profits from the company. The big issue involving working for the company. Unless you have explicit authorization to work for the company, you may not do so. You may remain a passive owner (letting other people run the company that you own), but you may not work for the company unless you have permission to do so.
     

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