One of the most asked questions by foreign individuals planning to conduct business in the U.S. is whether a foreigner can be a shareholder of an S-corporation. Below are some basic concepts aimed at helping one to understand the rules applicable to different classes of alien individuals as governed by Internal Revenue Code 871. This information will be of relevance to a foreign person or someone doing business with a foreign partner.
First, there are S-corporation status qualifications. To qualify for S-corporation status, the corporation must meet the following requirements:
• Be a domestic corporation
• Have only allowable shareholders including individuals, certain trusts, and estates and may not include partnerships, corporations or NONRESIDENT alien shareholders
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
Noted above, NONRESIDENT ALIENS appear to be ineligible shareholders for purposes of S-corporation status qualification. However, the question arises as to whether any particular legal immigration status (e.g. holding a certain visa) has any impact on whether a nonresident alien can be an S-corporation shareholder. The short answer to that is "no".
