PDA

View Full Version : Opening Consulting Co. on EAD: Advice Needed


sankap
04-25-2009, 01:09 AM
Can any one point to a website that explains the various options for opening a 1-person consulting business on EAD? If that company performs a consulting service that is subcontracted through another company/vendor, which arrangement is preferable for an EAD holder--W2, 1099, or corp-to-corp? Any site that has all the info? Thanks!

morchu
04-25-2009, 01:22 AM
I guess your intention is to work as a consultant yourself. So most probably you are not worried about a liability of the company falling on you. I suggest you do a "sole-proprietorship" and file a "doing business as" certificate. You pay "self-employment taxes" on all of your income, and can deduct all business related expenses, but still keeping your tax returns very simple.

You can google for the other business types below.

In the below businesses, in the order, your liability on the company decreases, taxes gets more complicated, separation of business as an "entity" increases.

1. SelfEmployment
2. Sole-Proprietorship
3. LLC
4. S-Corp
5. C-Corp

I don't see any reason why a "one person" service company, without external venture capitals, should go beyond S-Corp.

Some states don't allow non-citizens to be "Officer" in an S-Corp/C-Corp, but some do.

Can any one point to a website that explains the various options for opening a 1-person consulting business on EAD? If that company performs a consulting service that is subcontracted through another company/vendor, which arrangement is preferable for an EAD holder--W2, 1099, or corp-to-corp? Any site that has all the info? Thanks!

sankap
04-25-2009, 01:30 AM
Thanks! So, if I do a "DBA" arrangement as you suggest and take up a project through another company/vendor, what would that arrangement be called--W2, 1099, or cop-to-corp? What's the difference between those options?

morchu
04-25-2009, 02:34 AM
Again the same things as above:
W2 -> None of the above options I mentioned. Just a regular contract-employee of your client. You get a W2 form in the year end from your "employer" (NOT really a client).
1099 -> means you will get a 1099-MISC in the year end from client. This is anywhere from Sole-Proprietorship
corp-to-corp -> from S-Corp. Some client require corp-corp to avoid some liabilities.

Again the complexity of book-keeping and taxes are in the order.

I suggest you start as 1099-MISC for now, with a sole-proprietorship DBA.
You will learn the maths and tricks of tax and liability soon and then compare other options.


Thanks! So, if I do a "DBA" arrangement as you suggest and take up a project through another company/vendor, what would that arrangement be called--W2, 1099, or cop-to-corp? What's the difference between those options?

newbie2020
04-25-2009, 10:05 AM
Generally 1 man consulting have lot of overheads, including insurance, book keeping, taxes etc... You may want to do a 1099-Misc or best option would be to go with a pass thru company. If you need more inputs PM me.

jthomas
04-25-2009, 01:31 PM
Generally 1 man consulting have lot of overheads, including insurance, book keeping, taxes etc... You may want to do a 1099-Misc or best option would be to go with a pass thru company. If you need more inputs PM me.

I am thinking of starting a business by being a consultant. At present i am a sole -propriter. I wish to know

1. I have heard bookkeeping can be given to some payroll company so they will take care of all the accounts. Or should i do it personally. I am a sole propritor at present and i file my tax return once a year. The form is a very simple form. What sort of overheads needs to be shown for a home business. :confused:

2. I have a EAD if USCIS will issue a RFE which paystuff should i show.

3. Can you provide more info about working as a independent contractor. Granted one won't be eligbile for unemployment benifits. SS needs to be paid fully. No medical benifits. What should be the billing rate (how much more than the regular salary person).

4. Any more info on how to start as a independent contractor and handle multiple projects


J thomas

sankap
04-25-2009, 04:14 PM
So, if you open a company on EAD and do contract work for clients, what do you do in case of an RFE? Your job title, description, and salary should be from the employer, which is you. Do you produce the EVL yourself? Do you also have to show paystubs?

morchu
04-25-2009, 09:02 PM
There is nothing against it in the law. You can be self-employed and show that your job still remains "same or similar" in terms of duties and behavior of job, and so eligble for AC21 benefits. But the difficult part is, to convince USCIS the above facts and regarding the "permanent" aspects of it. Again it depends on specific case situations.

So, if you open a company on EAD and do contract work for clients, what do you do in case of an RFE? Your job title, description, and salary should be from the employer, which is you. Do you produce the EVL yourself? Do you also have to show paystubs?

sankap
04-27-2009, 11:47 AM
Can anyone else share their thoughts/experiences re opening your co. on EAD and responding to an EVL RFE? Thanks!

va_dude
04-27-2009, 12:07 PM
checkout legalzoom.com

they have good info there.

chi_shark
04-27-2009, 12:14 PM
Can anyone else share their thoughts/experiences re opening your co. on EAD and responding to an EVL RFE? Thanks!

i consulted two lawyers on this topic. the lawyer who represents me on the g28 said that he was concerned about his representation and his I485 case and hence he would not recommend that i go self-employed as that could weaken his case. so, i consulted another lawyer who was not already working with me. this guy said that there is nothing against it in the law except for things people have already mentioned. however, the burden of proving that the job is permanent is upto the applicant and it will be very hard to prove so. in other words, it would be best to avoid it unless you believe it is good for your long term career. note that all this comes up only if there is any RFE related to this topic on your case or if they call you for interview..

Hope this helped.

jthomas
04-27-2009, 12:41 PM
i consulted two lawyers on this topic. the lawyer who represents me on the g28 said that he was concerned about his representation and his I485 case and hence he would not recommend that i go self-employed as that could weaken his case. so, i consulted another lawyer who was not already working with me. this guy said that there is nothing against it in the law except for things people have already mentioned. however, the burden of proving that the job is permanent is upto the applicant and it will be very hard to prove so. in other words, it would be best to avoid it unless you believe it is good for your long term career. note that all this comes up only if there is any RFE related to this topic on your case or if they call you for interview..

Hope this helped.

My lawyer told me that USCIS does not like to adjuciate I-485 for self employed unless one can show something concrete. When i asked, During this economic resession and people are getting laid off, what can they do? The lawyer replied lets see if we have a RFE and if you have something to show it will be good. you are legal to be self employed.
My advise for them who wish to start a business and are laid off, GO AHEAD with your goals. More than that, if you are somewhat succesful it will change your career, your ways of approach, and can survive any recession. Recession can occur frequently and in future one should have one full time job and one part time job and go on hopping between each other when required.
At Present i am laid off and started a business, filed a provisional patent application and soon going to do a regular patent and will be approaching the market. I have attended SCORE seminars and one to one counselling, working on a business plan soon. I am sorry to say i am not actively looking for jobs.
Yesterday, I heard from Aman and Vivek Wadhwa, don't be scared. In this country we need to be vocal. Prof Vivek Wadhwa was initially one like us and later he was a very successful entrepreur.
If any of you would like to start a business, PM me, lets make a group. We can also get media attention as immigrants wishing to start a business during this economic time.

J Thomas

sankap
04-27-2009, 08:30 PM
Thanks for all the responses. By the way, in response to an EVL RFE, you need an offer letter stating your job title, description, start date, and salary, right? Should the job be "permanent"-- although no job in this country is permanent and I've not seen any job offer letter saying it would be a "permanent" job? Any insights?

jthomas
04-28-2009, 01:56 PM
Thanks for all the responses. By the way, in response to an EVL RFE, you need an offer letter stating your job title, description, start date, and salary, right? Should the job be "permanent"-- although no job in this country is permanent and I've not seen any job offer letter saying it would be a "permanent" job? Any insights?

The job is intended to he permanent. This is how a guy registers a business and opens a bank account "What would be the intended transaction you would be doing in a month" My banker told me to write ONE MILLION DOLLARS.

SO if you have a registered business name you can tell you are working of that business. Secondly, keep a data book of what you did for the day (Check inventors note book on google, 2 signatures). So that reflects your job description. Start date is the date you got laid off and end date is the date you will be rehired.(maybe). The business is intended to be permanent. However the efforts will increase or decrease.
Then let USCIS decide about the same. If you are not able to find Inventors note book check the same in public library or Patent it yourself by David Pressman book.
Rest let USCIS figure it out. It is legal to port for self employment while on EAD.

Hope this helps :) (:

J thomas

axp817
04-28-2009, 02:05 PM
JThomas,
You have consistently provided helpful information on the topic of Self employment under AC21 and I would like to thank you for doing so.

Your time and effort is highly appreciated.

jthomas
04-28-2009, 02:35 PM
JThomas,
You have consistently provided helpful information on the topic of Self employment under AC21 and I would like to thank you for doing so.

Your time and effort is highly appreciated.

There are guys in IV who have approached me who are really interested in doing a business to get some suggestion. Some of them have started up with their plans and i wish them best of luck. Maybe we should form a small group and start helping each other.

How about we start a business plan like

Aim :- 1. To start a consultancy firm with experts in all fields to give advise to clients
2. 50% of the income would be given to IV
3. Maybe a non profit firm where employees (guys who are laid off from work, H1B) take their salary and rest of the income goes to IV

Functions :- 1. clients will email questions and the experts will answer them for a fee.
2. If a client needs in person consultancy then a person is employed (laid off, H1B) will travel.

Other fuctions 1. Make a website with all the products our members can manufacture and sell it through a common website. Marketing can be done through emails from India/... for a very less expense(At present one can get a person roughly for $100 dollar a month salary)

Research : - I have checked some consultancy services online who pays $120 per hour to the expert and get $575 from the client.

santb1975
04-29-2009, 01:52 AM
Can an alien port to self-employment under INA 204(j)?
Answer: Yes, as long as the requirements are met. First, the key is whether the employment is in a "same or similar" occupational classification as the job for which the original I-140 petition was filed. Second, it may be appropriate to confirm that the new employer and the job offer are legitimate through an RFE to the adjustment applicant for relevant information about these issues. Third, as with any portability case, USCIS will focus on whether the I-140 petition represented the truly intended employment at the time of the filing of both the I-140 and the I-485. This means that, as of the time of the filing of the I-140 and at the time of filing the I-485 if not filed concurrently, the I-140 petitioner must have had the intent to employ the beneficiary, and the alien must have intended to undertake the employment, upon adjustment. Adjudicators should not presume absence of such intent and may take the I-140 and supporting documents themselves as prima facie evidence of such intent, but in appropriate cases additional evidence or investigation may be appropriate.

santb1975
04-29-2009, 01:58 AM
Self Employment can be done. However, it is recommended to get an attorney and come up with a strategy before chosing this route. Choosing the path of Self Employment requires a lot of commitment. it takes a lot to start a Business, build relationships, credibility with clients and generate revenue. You are looking at paying a salary for yourself, Good medical benefits and also building a retirement portfolio at the least in addition to administrative costs.

Marphad
04-29-2009, 02:54 PM
You cannot open a S-Corp on EAD, you must be a US citizen or a GC holder. However, you can open a C-Corp (corporation) or a LLC (self employed or partnership) infact anyone can open a C-Corp or LLC independant of a visa.

The main advantage of the S-Corp was to be able to file tax through your regualar 1040 but S-Corp will require you to take a nominal salary (you will end paying double payroll taxes) but the pass through provision is what most people like. Can be converted to a C-Corp later

The C-Corp is a regular corporation (ie. GE, MSFT etc..), here quarterly filings are required. The are taxed at the state and federal level and there are major personal tax considerations as well (you will be taxed captial gains for profits etc...). Restrictions on coverting back to a S-Corp.

The LLC sole-propritorship option is the best option in my opinion. You get the pass through benefit of the the S-Corp (filing taxes on your 1040 instead of a seperate filing), there is not requirement to take a salary (good for expensing the entire income and saving on taxes). After you get a GC you can convert it to a S-Corp or a C-Corp. Note: you also have a PLLC option which is Professional LLC (that is bit nuanced.. so you can just go with the LLC option and ignore the PLLC option)

The process of open either of the options are very straight forward. The law and process vary from state to state. The members, mgrs definition also varies from state to state. I would recommend that you consult a good CPA to understand better what your options are and what is best for you.

Good Luck.

Not true. I have S-Corp.

sankap
04-29-2009, 04:46 PM
Which is a better option--Sole Proprietorship, LLC, or C-Corp, esp. for tax purposes (e.g., for deducting business expenses?) So, if I open any of those, can I work corp-to-corp with a recruiter?

m306m
04-29-2009, 04:58 PM
You are correct!

S-Corp cannot have any "nonresident alien shareholders". As per IRS guidelines H1B and EAD (not sure about EAD) are not considered nonresident aliens so therefore a S-Corp is a valid option.

Here is a good site that compares the 3 forms of businesses
http://www.legalzoom.com/business-formations/compare-documents.html

When I was working through this I found that a sole proprietor LLC was the best option for me (I was incorrectly told later by an account that "I would not qualify for a S-Corp anyway").
Specific benefits were:
1. Pass through Taxation (same as S-Corp)
2. Ability to Not take a salary (S-Corp requires that you take a nominal salary and hence be subject to the employers portion of the payroll tax.)
3. In some cases lower state taxes

In any case either of the forms would work for someone who want to remain a single person business for a long time. However, if a person has asperations to grow the business (ie. hire workers, raise capital etc..) and become a C-Corp, it is better to be a S-Corp now and then convert to a C-Corp. I had stated in my earlier post that you can convert LLC to C-Corp. I would like to add that it is considerably harder to convert a LLC to C-Corp than it is to convert a S-Corp to a C-Corp (simple as unchecking a box). LLC have to be merged into a C-Corp (need accountants and lawyers to help).

One has to figure out on their own which sort of business structure works best for them.

Not true. I have S-Corp.

sankap
04-29-2009, 05:16 PM
I was informed by a well-known immigration law firm that, if you open your own co, you can only be working on W-2 in case of an EVL RFE. Based on the Yates memo and posts here, that doesn't appear to be the case--i.e., you can open your own co and do a 1099 (corp-to-corp) arrangement. Am I right? Also, based on the info, I feel opening a sole proprietorship (DBA) is a better option than an LLC.

IRS and Wikipedia have useful info on the types of business you could open:
http://www.irs.gov/businesses/small/article/0,,id=98202,00.html
http://www.irs.gov/publications/p583/index.html
http://www.irs.gov/businesses/small/selfemployed/index.html
http://www.irs.gov/publications/p334/index.html

m306m
04-29-2009, 05:25 PM
Which is a better option--Sole Proprietorship, LLC, or C-Corp, esp. for tax purposes (e.g., for deducting business expenses?) So, if I open any of those, can I work corp-to-corp with a recruiter?

Typically all these 3 forms of business allow you to deduct certain expenses (Accountants on this forum please help out. I am NOT an accountant and I am aware there is nuance to these rules)
1. Gas for consulting work
2. Restaurant bill when taking a client out for a business trip
3. Licensing fees
4. Home office equipment
5. Car lease payment / depreciation
6. Home office space can be depreciated (if the room is used exclusively as a office)
6a. Part electricity for home
7. Cel phone bills if they are used mainly for business
8. Additional phone line if used for business.

Now the deduction can be different if you are talking about buying a fleet of vehicles, investing in major buildings for office space etc..

I am not an accountant.. but a good accountant can shed light more specifics.

Also know that to get at you money in a C-Corp it is a little harder.. For eg:
You earn $100,000 into a C-Corp for consulting services.
you deduct expenses for doing business of $40,000
you end up with a gain of $60,000
1. you can choose to leave the money in the business (you get hit with both federal and state taxes on the profit)
2. you withdraw the money as profit back to yourself you pay captial gains tax after you pay the corporate tax (double taxation)
3. you consider yourself an employee and withdraw the money as wages (in a W2) you pay double payroll taxes (7.5% employee + 7.5% employer match)

In an LLC - sole propiertorship
1. you simply pass through the income into your 1040.
2. if you take the 60K you will have to pay the double payroll tax (Self employment tax) here same as C-Corp or S-Corp.

So simply put, there are a few things to consider before getting into this. Talk to a CPA (usually costs between $150 - $250 and hour - 1 hour should be all you need) and setup the structure that is most appropriate to your needs.

nkrishna
05-01-2009, 02:32 PM
maybe we should do a poll to find out which is most opted by everyone and then decide

Sole/S-Corp/C-Corp

sankap
05-06-2009, 11:32 AM
Here's an excellent site that compares different options in detail:

http://biztaxtalk.com/node/3#corp

hopefulgc
05-06-2009, 12:14 PM
AFAIK.. you cannot own or be a partner in an S-corp on without PR or citizenship


Not true. I have S-Corp.

Marphad
05-06-2009, 12:31 PM
AFAIK.. you cannot own or be a partner in an S-corp on without PR or citizenship

Well, I need to confirm again with my CPA but I am damn sure that my current corporation is S-Corp and I have been paying Fed and State taxes too for some time.

morchu
05-06-2009, 01:04 PM
Not true.

It is a misconception. Be aware that "resident" for state/IRS/tax is not equivalent to "permanent resident" for USCIS. Also different states might have different regulations.

In many states it is possible to be an officer of an s-corp, even in H1B (basically you invest, own-shares and takes profit). But obviously to materially participate in the business, you need employment authorization.

AFAIK.. you cannot own or be a partner in an S-corp on without PR or citizenship