Question:

I am getting ready to form an service related internet business, which could not be profitable in the first year or 2. The revenue will most likely be coming from US businesses. I reside and work in New Jersey, although I am non-resident alien authorized to work for my employer only. Therefore there will be 1-2 partners extra in the business that are US citizens/residents. There will be no employees until the business is profitable. I would appreciate your opinion on several basic questions:

1/ which entity to choose - because of my immigration status, the best entity for a service related business - S-corp is out of question - therefore LLC or C-corp are the only options (I only consider et protecting entities and I want to take US tax advantages for myself) 2/ which state should I register this company ? does it make sense to register company off-state while living in New Jersey ? does it make sense to register the company off-shore ? 3/ will I have to pay NJ tax on the business income in case most of the business will be done out of state ? 4/ which company registration service do you recommend ?

Answer:
I am getting ready to form an service related internet business, which could - not be profitable in the first year or 2. The revenue will most likely be - coming from US businesses. I reside and work in New Jersey, although I am - non-resident alien authorized to work for my employer only. Therefore there - will be 1-2 partners extra in the business that are US citizens/residents. - There will be no employees until the business is profitable. I would - appreciate your opinion on several basic questions: I have always wondered about that, having been a non-resident alien once myself:

- If you're in business for yourself (self employed or owning a business), meaning you're not employed by somebody else, is that legal with a social security card marked "not valid for employment"? (Not that mine ever was)

- and: if you write a book, can you be paid royalties in spite of not being allowed to work? Where is the boundary? I know there are lots of foreign non-resident investors who own real estate (certainly with the purpose of making money, not losing money) or US stocks.
1. You will be an employee of the business. Other than out of the ordinary areas such as grants of certain stock options and the like, all of the money paid to you can be claimed as an expense no matter which legal entity that you choose. In other words, there are virtually no tax ramifications to you as to the legal form of the business. No form of incorporate will allow before tax profit to flow to passive participants (the company will pay taxes before it yields anything to the owners of the company - your "1-2 partners") so again, no difference. 2. You may read on the internet about "incorporate here" (or there). The truth is that legally you will owe taxes to any state in which you have a physical presence. If you are operating from NJ, you owe NJ. You can incorporate in Nevada to try to claim a Nevada only presence and avoid taxes. You can incorporate in Delaware (like much of the Fortune 500) to gain the benefit of corporation friendly laws and Chancery Court. None of these gambits are worthwhile to anything other than very large corporations with move potential tax liabilities and legions of lawyers to argue their cases. If you incorporate, do it in your home state. 3. See #2 4. I don't know what you mean by "company registration". If you mean "incorporate', you can learn how on the NJ State web site. If you need help, contact a lawyer. 5. If you get answers, it's a good group. If you don't want to wade through spam, choose moderated groups.

I have always wondered about that, having been a non-resident alien once - myself:
If you're in business for yourself (self employed or owning a business), - meaning you're not employed by somebody else, is that legal with a social - security card marked "not valid for employment"? (Not that mine ever was) I'm not a lawyer so some of what I suspect about how one gets around the rules may not be correct, or may have been changed, but here's my opinion on how they get away with this.

If you don't hire yourself then you're not working for wages.  If you are an owner of the company, supposedly you would get either dividends or the remaining profits through pass through as an S corporation or directly as (one of) the owner(s) of an LLC.  Since you're not working for wages the rules against employment don't apply.

- - and: if you write a book, can you be paid royalties in spite of not being - allowed to work? Yes.

- Where is the boundary? Receiving wages as an employee of an American company.  If you are provably an independent contractor you're a private business and are not an "employee" of the other company.

Now if it's not an American company then the rules don't apply.

If someone was a citizen of, say, Mexico, snuck into the U.S., came to Washington, D.C. and got a job at the Australian Embassy it wouldn't matter whether they were authorized to work in the U.S. because they are {de de jour} working in Australia even though the building is physically inside the united states, it is as a matter of law Australian soil.

It's only if you become an employee of an American company - or a foreign company that has an office in the U.S. - that the issue of illegally working if you're not authorized to do so.

This is one of the reasons why it's kind of unfair, because those who are non-resident aliens without authorization to work would otherwise work low-level jobs (cooks, dishwashers, cleaning people, farm workers) but are in a position where it is illegal for them to do so and thus are mercilessly exploited.

On the other hand, those who are at the higher end can set up their own corporations, have the corporation contract with the other party and then work for their own corporation as an independent contractor.  Or incorporate in their country, be a legitimate employee of that company and then do work here as an employee of the other company which has contracted with the local company. (That, however might not be legal, I'm not sure, but if there's no paperwork filed the federales won't know about it.)

- I know there are lots of foreign non-resident investors who own real estate - (certainly with the purpose - of making money, not losing money) or US stocks. They again, are not working for wages.  The system is rigged to make it illegal for the little guy (who isn't a citizen) to make money but the big boys who collect rents ("rents" meaning unearned income) and royalties win big time.