Discussion:S Corp Definition of a Resident Alien

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Discussion Forum Index --> Tax Questions --> S Corp Definition of a Resident Alien

Habari (talk|edits) said:

19 February 2006
One of the criteria for establishing an S Corp is that none of the shareholders of an S Corp should be a Non Resident Alien. i.e. they all should be at least Resident Aliens. Otherwise, that terminates the S status of the S Corp.

I read in the Regs that only the Green Card or Citizenship test applies with respect to S Corps when determining whether a person is a Resident Alien or not - there is no reference to the Substantial Presence Test. In other words. someone could be residing in the US on say, an H1 visa (& fulfilling the Substantial Presence Test) but cannot legally establish an S Corp - Am I correct?

Riley2 (talk|edits) said:

19 February 2006
Reg § 1.1361-1(g)(1)(i) doesn’t really say that the green card test will be the sole determinant of alien eligiblity. Instead, the regulations provide that a nonresident alien, as defined in Internal Revenue Code § 7701(b)(1)(B), is not an eligible shareholder. That reg section further provides that aliens who either meet the substantial presence test, possess a green card, make the first year alien’s election, or make a joint return election under Sec. 6013(g) or Sec. 6013(h), are eligible shareholders.

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