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November 4, 2008 9:30 AM

Is it permissible for a J1 US visa holder to incorporate and own stock (1/3) in a C Corporation?

This is in California. The visa is for a research position at a university. The company aims to commercialize some of the research.

posted by tabulem to Law & Government (1 answer total)

Best answer: IANAL, but incorporation of a C corp does not depend on the nationality of the one doing the incorporating. There are three things to be aware of though.

First, it really does have to be a C corp. Federal tax law prohibits foreign nationals from owning stock in S corps.

Second, even though you can own stock in and even be a director for a C corp, you are not permitted to receive wages or a salary from that corporation, as that would violate the terms of your visa. This would include being paid in stock or options. You can take dividends, as those go to shareholders indiscriminately, but may not receive any kind of compensation for services rendered.

Third, related to the point above, C corporations pay income tax, state and federal, on profits before they pay dividends, so you might consider looking for a different form of business association. Perhaps an LLC?

So yeah, incorporation is probably allowed, but as a foreign national you are restricted in your ability to draw a salary and the tax situation may not be to your advantage.

I'd recommend getting in touch with a California lawyer, or even just googling "California" with "incorporation" or "LLC".
posted by valkyryn at 9:46 AM on November 4, 2008