Home - What makes an Limited Liability Company (LLC) the most popular business entity type for the E-2 visa?
Firstly, it is easier to form. It has a simpler process than creating a corporation and involves less paperwork. This process depends on the state where it is formed, but most require articles of organization, which can be conveniently filed online. After this, roles and responsibilities are defined, often via an operating agreement, though it is not required.
Secondly, the Internal Revenue Service (IRS) does not consider an Limited Liability Company as a separate vehicle for tax purposes, resulting in flexibility and a simpler process when compared to corporations. Limited Liability Company members can choose how they are taxed, e.g., as a sole proprietorship, a partnership, or a corporation.
The most common option is a sole proprietorship, in which case the member has to pay taxes themselves on the LLC’s profits instead of the Limited Liability Company paying those taxes. This is referred to as pass-through taxation. In this case, as the owner of the Limited Liability Company, its profits and losses are reported on your personal tax return. This simplicity can be advantageous when demonstrating that you are developing and directing the business, which is a key criterion for the E-2 visa. It is also a more straightforward process when compared to corporations, which can involve layered tax processes.
Thirdly, Limited Liability Company iseasier to maintain as it requires fewer formalities than corporations. I.e., corporations have a required structure—directors and officers, board meetings, annual meetings, board resolutions, etc. These are irrelevant to Limited Liability Company. You can choose to manage the company yourself. This adaptability can support your case of having a substantial role in the business’s operations, another key criterion for the E-2 visa.
These are the main reasons why most E-2 treaty investors gravitate towards forming an Limited Liability Company rather than a corporation. It is simpler, flexible, utilizes pass-through taxation, and requires fewer formalities.
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