Starting a Business in the US as an Immigrant: Tax Basics

Choosing the Right Business Structure

Your first decision as an immigrant entrepreneur is choosing an entity type. Each has different tax implications:

Sole Proprietorship

No separate legal entity. All business income and expenses are reported on Schedule C of your Form 1040. You pay self-employment tax on net profits. Simple to set up, but offers no liability protection.

Single-Member LLC

By default, the IRS treats a single-member LLC as a "disregarded entity" - it is taxed exactly like a sole proprietorship (Schedule C). You get limited liability protection from state law, but your tax filing is simple. You can elect to be taxed as a corporation instead.

Multi-Member LLC

Taxed as a partnership by default. The LLC files Form 1065 and each member receives a Schedule K-1 showing their share of income, deductions, and credits. Each member then reports their share on their personal return and pays self-employment tax on their distributive share.

S-Corporation

An S-Corp can reduce self-employment tax for profitable businesses. The owner-employee pays a reasonable salary (subject to payroll taxes), and remaining profits are distributed as dividends (not subject to self-employment tax). Important: nonresident aliens cannot be S-Corp shareholders. Only US citizens and resident aliens qualify.

C-Corporation

A separate taxpaying entity. C-Corps pay corporate income tax (21% flat rate in 2024) on profits, and shareholders pay tax again on dividends. This creates "double taxation" for small businesses, but C-Corps have no restrictions on nonresident alien shareholders and are common for venture-backed startups.

Getting Your EIN

Every business entity needs an Employer Identification Number (EIN) from the IRS, even if you have no employees. An EIN is used to:

• Open a business bank account
• File business tax returns
• Pay employees or contractors
• Apply for business licenses

How to get an EIN: Apply online at IRS.gov (instant approval for US residents). If you are outside the US, you must apply by fax or mail using Form SS-4. Sole proprietors can use their SSN instead of an EIN, but a separate EIN is recommended for business/personal separation.

Visa Restrictions on Business Ownership and Work

This is critical. Immigration status and business activity must align:

The E-2 Investor Visa is designed for foreign nationals who invest in and actively manage a US business. Brazil does not currently have an E-2 treaty with the US, but many other Latin American countries do.

Self-Employment Tax

If you are a sole proprietor, LLC member (not an S-Corp), or partner, you pay self-employment (SE) tax in addition to income tax. For 2024:

• 15.3% on net SE income up to $168,600 (12.4% Social Security + 2.9% Medicare)
• 2.9% on income above $168,600 (Medicare only)
• An additional 0.9% Medicare surtax applies on SE income above $200,000 (single) or $250,000 (MFJ)

You deduct half of SE tax as an above-the-line deduction on your Form 1040, reducing your adjusted gross income.

Quarterly Estimated Tax Payments

Business owners do not have withholding taken from their income like employees do. You must make quarterly estimated tax payments if you expect to owe $1,000 or more in tax for the year.

2024 estimated tax due dates:

• April 15 - Q1 (January - March)
• June 17 - Q2 (April - May)
• September 16 - Q3 (June - August)
• January 15, 2025 - Q4 (September - December)

Use Form 1040-ES to calculate and pay. Underpaying can trigger a penalty. The safe harbor is to pay either 100% of last year's tax liability or 90% of the current year's liability.

Record Keeping

Good records from day one save you at audit and maximize your deductions:

• Separate bank account for business income and expenses - never comingle with personal funds
• Track all business expenses (software, equipment, home office, vehicle use, professional fees)
• Keep receipts for expenses over $75
• Use accounting software (QuickBooks, Wave, or similar)
• Track mileage with a log if you use a vehicle for business

Get Your Business Tax Picture Clear

Business taxation for immigrants involves both tax law and immigration law. The right structure for you depends on your visa status, business type, and income level. Run the free 5-minute diagnostic to understand your full tax situation as an immigrant entrepreneur.