Hi Experts,

I am a U.S. citizen and have an LLC, mainly focused on real estate investment. I have a cousin who comes to the states as an international student (F1 visa), and now him and his family want to join my LLC as a partner.

My questions here are :
1. Is there any law-related problem that my cousin is on partnership in my LLC ?
2. If there is no problem, how does it work, in terms of partnership's dividend and tax liability ?
3. Is there any consequence to his current visa status (F1), and future visa status if any (OPT, H1-B) ?

Many thanks in advance and hope to hear back from experts.

Regards,

“1. Is there any law-related problem that my cousin is on partnership in my LLC ?”---->As far as I know, he can’t participate actual management in the(your) LLC, I guess it is MMLLC,a partnership, as a partner. In general, F1 visa( I guess either J1 or M1 visa too) holder can not run his business but can own his company( actually there are international students with F1 visa actually run online businesses but UNLESS it is minimal, maybe less than several hundred dollars, they can not acquire any income from the business, that would be accepting employment, violation of F1visas rule); however,he cannot work for it and receive income but instead hire a Green card holder or citizen to work for it in some executive position Under the regulations, off-campus work requires approval from USCIS and is possible only after the first year of study. The student must then maintain full-time study while working under either OPT/CPT no more than 20 hours a week while courses are in session, and no more than 40 hours a week during the summer and between semesters. In principle, it is violation of F1 visa regulation.
“2. If there is no problem, how does it work, in terms of partnership's dividend and tax liability ?”---->As said above; there is a problem; F1 visa holders should not work off-campus without authorization from the Department of Homeland Security. Students who work without authorization have their I-20s and visas terminated. They must immediately leave the United States.
“3. Is there any consequence to his current visa status (F1), and future visa status if any (OPT, H1-B) ?”---->I guess you need to get some help form an immigration attorney.

Hi Wnhough,

Thank you for your quick response.

I totally agree with what you said on F1 visa holder is not allowed to work off-campus. My question here is the cousin is till having his full time enrollment in school, he and his family just contribute capital to my investment LLC company and expect to get some shared profit out of that LLC. He basically will do very little of work, and it will not take much his time from school, as well as not be a big management in my LLC.

I hope to hear more from you, and any idea is highly appreciated.

Regards,

“ he and his family just contribute capital to my investment LLC company and expect to get some shared profit out of that LLC.”---> As you can see, your cousin and his family can contribute as much capital as they want to your LLC. So, they invest in any business and draw profits as share holders .They also may get dividends if the company gives them out. However, the profits are company profits, not theirs. The company will have to decide if they wish to reinvest all or parts of any profits (in case the business has a profit) and if they distribute part or all of the profits to the shareholders. If the company gives out dividends to the shareholders, they of course can get them and they would have to report them on their tax returns by filing 1040NR/1040NR-EZ. Your cousin is exempt from his FICA Taxes for the first five years.He is NOT even subject to 183 day SPT rule for the first five years as a F1 visa holder.
“He basically will do very little of work, and it will not take much his time from school, as well as not be a big management in my LLC.”----> As said previously, your cousin, as a F1 visa holder, can EVEN start his business( though it would be a very bad idea. There are all sorts of legal issues surrounding the formation of an LLC in US) , but he can NOT work for it, not even unpaid. As long as your LLC is going to employ anyone, your cousin in this particular case, it needs to get an I-9 form completed, with supporting evidence of legal right to work in the United States. This is the law. It is possible to volunteer for non-profit organizations,i.e., 501(C) 3 organization, where everybody else in similar positions volunteers. A classic example is volunteering for a church. But volunteering for a for-profit company is not possible. That pretty much makes sole proprietorship impossible. That's always considered working. If he is With OPT, then he can work in his own company, provided that the company is active in his field of study. However, the OPT does NOT allow him to work in a company, even his own, if the work is not in his field of study. It is called Practical Training for a reason. Self-employment on F1 is NOT allowed.

Dear Wnhough

Thanks again for your ideas. So as far as I understand your reply :

- There should not be a problem for my cousin to join my LLC as a capital partner, as long as he does not do any actual work (because it's not related to his filed of study). He only could be a passive partner.

- He and his family can get dividend/profit, in case the LLC makes profit and decides to distribute to all share holders. He/his family, however has to file the 1040NR/1040NR-EZ for federal/state income tax. But will not be taxed for social/medical tax as he's not resident alien? Also, I am not really sure what the 183 days SPT rule should do in this case, but I assume that my cousin will not be treated as a resident alien, in any type of tax that only used for citizen and resident alien, because he's exempted from that?

- "As long as your LLC is going to employ anyone, your cousin in this particular case, it needs to get an I-9 form completed, with supporting evidence of legal right to work in the United States." --> My cousin does not intend to start his own business, but if there is any chance that he can be employed to get the working experience, we're happy to do so. As you mentioned about this I-9 form, is this something he's legally allowed to do ? Or he's still under the restriction for F1 visa, and the only way to work is having OPT/CPT, with the work must be related to his field of study ?

My apology if I've asked too many questions. As I am a newbie and still trying to learn from a big source of immigration and tax laws. Many thanks again for your continuing help.

Regards,

“- There should not be a problem for my cousin to join my LLC as a capital partner,”----> Yes; he( or even his family) can be a passive investor, a passive partner( remain as a shareholder on paper).
“ as long as he does not do any actual work (because it's not related to his filed of study). He only could be a passive partner.”--->Correct; your cousin is on an F-1, so , as you can see, he is therefore not eligible to work, however, as we said, passive investment is generally permitted. He can’t be a regular partner of the LLC. I mean, your cousine cannot have any role in the operations of your LLC, your cousin can just receive dividends. He can just be a passive partner of the LLC.
“- He and his family can get dividend/profit, in case the LLC makes profit and decides to distribute to all share holders. He/his family, however has to file the 1040NR/1040NR-EZ for federal/state income tax. But will not be taxed for social/medical tax as he's not resident alien?”---->Your cousin, for example, as a F1 visa holder, a nonresident for tax purposes, is not subject to FICA Taxes on his income in the US( I mean his US source income, earned and unearned income, i.e., dividend or interest income that he earns in US) for the first five years.
“ Also, I am not really sure what the 183 days SPT rule should do in this case, but I assume that my cousin will not be treated as a resident alien, in any type of tax that only used for citizen and resident alien, because he's exempted from that?”---> What I mean is that as an F1 visa holder, your cousin is considered as non resident alien for a period of up to Five years.So, as you know, there are restrictions against off-campus employment and against unauthorized employment or etc.However, in 6th year, your cousin is usually treated as a resident alien of the US for tax purposes. On the resident tax return, he is just like the U.S. citizens and residents in performing his business/ trade in the US without serious restriction. L1 or H1 visa holders are usually considered a U.S. resident for tax purposes just like US citizens or US residents, once they meet 183 day rule, the substantial presence test, for the calendar year however, your cousin, as a F1 visa holder is not subject to the 183 day rule to be recognized as a resident for tax purposes, but need to wait for five years to be regarded as a resident UNDER the US Tax Law. I mentioned the rule JUST for reference, OK???
"As long as your LLC is going to employ anyone, your cousin in this particular case, it needs to get an I-9 form completed, with supporting evidence of legal right to work in the United States." -->” My cousin does not intend to start his own business, but if there is any chance that he can be employed to get the working experience, we're happy to do so”. “ As you mentioned about this I-9 form, is this something he's legally allowed to do ?”---->I know that. Not really; I assumed that as long as your cousin is employed( or if you want to hire your cousin as an EE of your LLC, just in case) as an EE of the LLC( as said above, “As long as your LLC is going to employ anyone”) then he needs a From I-9.However, as you said, this is not an option for him as a F1 visa holder.
“Or he's still under the restriction for F1 visa, and the only way to work is having OPT/CPT, with the work must be related to his field of study ?”---> Correct; I know; your cousin should be working in a field related to his course of study. As said previously, working in disguise( I guess there F1 visa holders actually do work in disguise in US) can lead to deportation from US, since F-1 doesn't permit that.

One of my relative, a USA citizen, wants to start an online venture as LLC firm with a F1 student as a passive investor. (a) Can this F1 student do this? The student is a 3rd year student and that venture relates to the course/subject he is studying. (b) If yes, does he need to follow a CPT process? (c) Can she receive income if the venture make profit? (d) any legal restriction that the student must adhere to? (e) can the student hold 50% share? (f) understand that LLC is of 3 types - C, S and Partnership. Which one allows equity share? Can F1 student be a member or partner in any of these LLC form? Thanks indeed.