Why non-residents cannot elect S-Corp
- IRC Section 1361 requires all shareholders to be US persons
- Foreign individuals are not US persons
- Foreign entities are not eligible shareholders
- Election made on Form 2553 requires shareholder eligibility
- Improper election (with non-US shareholders) is automatically invalid
What non-residents can elect
- Disregarded entity: default for single-member, no election needed
- Partnership: default for multi-member, no election needed
- C-Corp: via Form 8832, rarely beneficial for non-residents
- S-Corp: NOT available to non-residents
If you become a US resident later
If you relocate to the US and become a tax resident, S-Corp election may become available for your single-member LLC. Form 2553 must be filed within 75 days of formation or 12 months back. S-Corp benefits include lower SE tax (only "reasonable salary" portion subject to SE tax). Most non-resident-to-US-resident converts also consider whether to keep the existing LLC or form a new entity.