Can I incorporate a business?

[BrainGreen]

Hi Guys,

I wish to incorporate a business but the problem is I am on a work permit.

Can I incorporate a business, if I am on a work permit(L1) ??
:?:

[nelsona]

You can, but you cannot do any work for that business, because that business cannot sponsor you, and certainly not in L1 status, which is the only status you are allowed to maintain.

[AskTax Guru]

I assume that you are a nonresident alien, NOT a US resident for tax purposes, then, generally, there are no restrictions on foreign ownership of a company formed in the US. It is necessary to understand that you must register not in the country itself but in one of the states and according to the state legislation. The procedure for a foreign citizen to form a company in the US is the same as for a US resident. It is not necessary to be a US citizen or have a green card to own a corporation or limited LLC formed in the US. HOWEVER, a foreign citizen may be a corporate officer and/or director, but may not work in the US or receive a salary or compensation for services provided in the US unless the foreign citizen has a work permit (either a green card or a special visa) issued by the US. Some work permits allow a foreign citizen to work only for a sponsoring employer. Such work permits generally do not enable a foreign citizen to also work for a new, unrelated company formed by the foreign citizen. The foreign citizen would need to obtain a separate work permit to work for the new company. You can own a business but unless you have a work visa, you are not allowed to work for your company in the US . In the case of an S Corp, a resident alien/ A foreign citizen being a US resident for tax purposes, may be a shareholder of an S Corp. The regulations only prohibit non-resident aliens from being shareholders. However, you must be careful. If that shareholder loses permanent resident status/ status to be treated as a US resident for tax purposes, then the S Corp election is revoked at that moment. So UNLESS you are a US resident for tax purposes, you can’t incorporate an S Corp.

[canampilot]

I am a dual citizen living in Canada. I recently formed my own corporation for contract work here in Canada. At this point in time I do not have any work in the States to speak of, so I have not incorporated in the USA.
Im just curious what, if any, implications may arise from the IRS point of view on this. Thanks.

[JGCA]

The corp since it is canadian will filew a T2 with Rev Canada. You as an individual will file a T1 and 1040 in USA since you are a USC wherein you report all individual world wide income to Canada and US and claim tax credit with IRS for any CND tax paid. THe corp as you know pays its own tax to CRA only but as a USC you have reporting requiremewnts to make to IRS since you own more than 10% of the shares this is a reqirement to diclose ownership annually to IRS. THere is an accumulated earning tax to pay to IRS based on future growth of teh Retained Earnings over a certasin threshold but it will not necessarily apply if the money is removed from the corp via salary and or dividends.

[canampilot]

Thank you for that response. I am frustrated to learn that even as an incorporated contractor some companies will not allow you to work for them as such since CRA deems them to be employees and not contractors. In my opinion, I have my own tools, work my own schedule and provide a service with a risk vs reward factor... I am indeed a contractor!
The employer states that in a recent CRA audit contractors had too many similarities to employees and therefore were penalized heavily.
I researched this at the CRA website and while it is true some criteria may be shades of grey, it really is unnerving (in my opinion) for CRA to make this determination.
My question is somewhat confusing,so bear with me. Im wondering if there is a way that I can sub contract myself out to another company who wants to treat me as a part time employee? Also, they will withdraw, EI, CPP and WCB from my earnings even though I carry my own WCB.
Thanks.