At the offices of Cyrus D. Mehta, we are often privileged to meet talented young entrepreneurs who are starting businesses. We have been lucky to assist them in growing and helping them attract the talent they require to fill the positions they are creating. Very often, these entrepreneurs need immigration representation themselves.

The excitement of starting a new business must be tempered by the legal and financial realities that place requirements on new business owners and executives. While our practice is largely in immigration law, we also provide services in helping entrepreneurs choose what form their venture will take.

Of course, the form of the venture has significant repercussions for the types of visas that the investors and principals may use. Both E and L visas are intrinsically tied to the type of corporate ventures involved and the balance of the investments. When entrepreneurs seek to use their entity as a vehicle for their own non-immigrant visa or permanent residence status, corporate form is an essential element of the calculus. In addition, corporate form may have a significant bearing on the company's ability to attract quality workers, seek public financing, and avoid "double taxation."

The principal forms of corporate organization in New York are: (1) the C Corporation; (2) the S Corporation and (3) the Limited Liability Corporation (L.L.C.). Elections of corporate form has significant consequences for immigration as well as the above mentioned concerns.

The C Corporation is the default entity created when no other form is specified. The hallmarks of the C Corporation are limited shareholder liability for acts of the corporation and taxation as a separate entity. Since the other forms also provide limited liability, the big issue for the C Corporation is how it is taxed. The C Corporation is taxed as a separate entity. This may not be preferable in the early stages of a venture as losses often occur and the investors may want to take advantage of their losses for their own taxes. In addition, C Corporations have the problem of "double taxation" whereby they are taxed on operating profits and gains earned in the sale of assets, In addition, distributions to shareholders are taxed as income. However, later on, the C Corporation is the best vehicle for public offerings as the other forms have restrictions that limit their utility in raising capital.

One way to avoid double taxation is the S Corporation. The S Corporation provides limited liability and allows for losses to pass through to the shareholders for tax purposes. However, a major issue with S Corporations is that a non-resident alien cannot be a shareholder. People on H, L, or E visas, people in adjustment of status can not be shareholders. S Corporation status automatically terminates upon a non-resident alien's ownership of shares of the corporation. The corporate form will default to C Corporation. Taxwise, it is advantageous. Operating losses are taxed once as if realized by the shareholders. Despite the tax advantages, the S Corporation has limitations on the number and type of shareholders. The Company may not have more than 75 shareholders and may only issue common stock. Only real persons (not corporate) may be shareholders, although there is an exception for §503(c) corporations. And, as mentioned above, non-resident aliens can not be shareholders. These limitations on shareholders mean that the S Corporation is an imperfect vehicle for public offerings.

The Limited Liability Company (L.L.C.), while maintaining protection from liability, avoids double taxation without the restrictions of the S Corporation. Taxes pass through to the principals and the company's earnings are only taxed on one level. Although taxed like an S Corporation, the S Corporation's many requirements do not apply to the L.L.C. The L.L.C. may make a lot of sense at start up, but because it is taxed like a partnership, it is not suitable for a public offering. In addition, there are tax disincentives that discourage the use of stock options as a method of compensating employees.

This, of course, is a very brief rundown of the different form of corporate organization. They all have effects on immigration in addition to the issues discussed above. We can help you with establishing yourself in business as well as achieving your immigration goals

About The Author

Cyrus Mehta, a graduate of Cambrdige University and Columbia Law School, practices immigration law in New York City. He is Vice Chair of the American Immigration Lawyers Association's National Labor Department Liaison Committee, trustee of the American Immigration Law Foundation and recipient of the Joseph Minsky Young Lawyers Award. He is also Chair of the Immigration and Nationality Law Committee of the Association of the Bar of the City of New York. He frequently lectures on various immigration subjects at legal seminars, workshops and universities, and may be contacted at 212-686-1581 or info@cyrusmehta.com. His website is www.cyrumsmehta.com