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LLC or c corporation for non immigrant partner in business

Asked by: Raj  — 25 March, 2013

I am US citizen and I am in the process of buying restaurant in NJ. I want to make my brother 50% of partner who is working in Muscat, Oman and citizen of India. C corporation or LLC is better in my situation? What type of tax forms I need to tell my accountant to fill up for my brother’s share of taxes?

Answered by: admin  — 25 March, 2013


There are pros and cons to both structures for a non-resident. A C-Corp would mean the brother is not necessarily required to file a US tax return. He can be paid dividends from the C-Corp, but as with any C-Corp there is no tax deduction for dividends paid out so the earnings are likely to be double taxed, once by the corporation and then by the owners either in the US or in India as dividend income.

A partnership would eliminate the double taxation, but definitely subjects the non-US brother to US taxation for his share of earnings and profits from the business. The brother in India would then have to file a 1040NR and report his share of profits and pay US tax on those profits. The partnership would also need to withhold tax at 30% for the foreign partner. Depending on his earnings the witheld tax would be credited and potentially refunded against what he may owe when he files his individual non-resident tax return.

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