Non-resident alien S-corp owner - what now?

I own a Florida LLC for several years and made an S-corp election in January of 2021. At the end of 2022, I moved abroad and returned my green card so I have just become a non-resident alien.

Since non-resident aliens cannot own an S-corp, I am wondering if the below options are available to me:

1) Revoke S-election and file as C-corp for 2023?

2) Revoke S-election and file form 8832 and elect to be classified as (foreign-owned) single owner disregarded entity LLC for 2023?

I would prefer option 2 and return to single owner LLC taxed as disregarded entity. However, I filed a form 8832 (going from multi member to single member LLC) as well as form 2553 2 years ago and understand that it may not be possible to make another tax classification change within 60 months. Would this 60 month limitation also apply in this case, since it is a necessary change that I am required to make due to my residency status change?

Any guidance would be greatly appreciated!

Thanks in advance!

1956

1 Best answer

Level 13

Jan 16, 2023 1:41:16 PM

A few comments:

There are numerous questions that need to be addressed, and those are best handled with a one-on-one with a tax professional.
In order to be able to elect S corporation status, you need to meet certain eligibility requirements. Apparently you met the requirements and have an S election acceptance letter from the IRS.
When you returned your green card and became a non-resident alien, you no longer qualify as an S corporation.
Previously, you went from a multi-member LLC to a single member LLC (disregarded entity), then made an entity classification change to an association / corporation. You then made an S election.
Once you lose your S status, due to an ineligible shareholder, you revert back to being a C corporation.
There is no need to revoke the S election as it has automatically been revoked based on the above. The S election has been terminated.
Facts are limited, but you will most likely have two returns; final S corporation return and then a C corporation. Specific timing of the split will be determined based on your facts and circumstances.
Facts are limited, but you could potentially liquidate the C corporation and start a new entity. Two caveats here; one, given your residency status, your entity options are not my forte, and two, there is an old liquidation-reincorporation doctrine. I have not looked at this area, can't tell you if it is still applicable to some transactions, but it should at least be addressed.
As you can see, this is best handled with a live visit with a tax professional where details, vision, understanding of your business flows freely.

Level 15

Jan 16, 2023 12:57:45 PM

I am going to page Champ @Rick19744 for this.

Level 13

Jan 16, 2023 1:41:16 PM

A few comments:

There are numerous questions that need to be addressed, and those are best handled with a one-on-one with a tax professional.
In order to be able to elect S corporation status, you need to meet certain eligibility requirements. Apparently you met the requirements and have an S election acceptance letter from the IRS.
When you returned your green card and became a non-resident alien, you no longer qualify as an S corporation.
Previously, you went from a multi-member LLC to a single member LLC (disregarded entity), then made an entity classification change to an association / corporation. You then made an S election.
Once you lose your S status, due to an ineligible shareholder, you revert back to being a C corporation.
There is no need to revoke the S election as it has automatically been revoked based on the above. The S election has been terminated.
Facts are limited, but you will most likely have two returns; final S corporation return and then a C corporation. Specific timing of the split will be determined based on your facts and circumstances.
Facts are limited, but you could potentially liquidate the C corporation and start a new entity. Two caveats here; one, given your residency status, your entity options are not my forte, and two, there is an old liquidation-reincorporation doctrine. I have not looked at this area, can't tell you if it is still applicable to some transactions, but it should at least be addressed.
As you can see, this is best handled with a live visit with a tax professional where details, vision, understanding of your business flows freely.

Level 2

Jan 16, 2023 2:21:18 PM

Thank you so much Rick - this is incredibly helpful!

Level 13

Jan 16, 2023 2:54:41 PM

You are welcome.

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Non-resident alien S-corp owner - what now?