Visa holders · E-2 visa
E-2 visa taxes depend on your residency, which also sets when you can hold S corporation shares.
Living in the US to run your E-2 business normally makes you a resident alien under the substantial presence test. It adds all your days here this year, a third of last year’s days and a sixth of the days two years ago. While you are still a nonresident, a single-member LLC you own files Form 5472 for any year it has transactions with you. Your capital contributions to it count as transactions.
Updated · Sources
E-2 investors and their US companies
- 183
- days on the three-year weighted count, with at least 31 this year, make you a resident alien.
- 15.3%
- self-employment tax generally applies to a resident owner’s net earnings from an LLC, up to the Social Security wage base.
- 1
- nonresident alien shareholder is enough to end an S corporation’s election.
When does an E-2 investor become a resident alien?
Some visas, such as the F and J, let you leave days out of the residency count. The E-2 is not one of them, so every day on it counts toward the substantial presence test.
You moved here during the year
Residency starts on your first day in the US in the year you pass the test. If you pass in your arrival year, that year is dual-status. You are a nonresident until that first day and a resident from then on.
You made trips to set up the company
Days on earlier business visits count toward the test too, such as trips to lease premises before you had your E-2. They can make you a resident sooner, or move your residency start date earlier. Trips of up to 10 days in total can be left out of the start date, if your tax home and ties stayed abroad. A longer trip counts in full. Those days still count toward the 183.
You still spend long stretches at home
Your tax home is your main place of business, so running the company from the US may rule out the closer connection exception. It can keep you a nonresident only in a year with fewer than 183 days here. Your tax home and closer ties must stay abroad all year. You must also file Form 8840 on time and take no steps toward a green card that year.
Your home country also treats you as its resident
When both countries count you as a resident, the tie-breaker in an income tax treaty can make you a nonresident for US income tax. You claim it on Form 1040-NR and disclose it on Form 8833. This treaty is separate from the one that makes your country an E-2 treaty country. If your company is an S corporation, a tie-breaker claim may put its election at risk, because the regulations leave that question open.
E-2 employees, hired by an E-2 company for executive, supervisory or essential roles, are tested the same way.
Social Security and Medicare reach a salary right away, and LLC profit only after you become a resident alien.
Self-employment tax is the Social Security and Medicare tax on the earnings of a business you own.
LLC profit, as a nonresident alien
$0
No self-employment tax is due while you are a nonresident, unless a Social Security agreement between the US and your home country applies.
LLC profit, as a resident alien
$21,194
The 15.3% applies to $138,525, the 92.35% of profit that counts as net earnings.
Salary from your corporation, either status
$22,950
7.65% is withheld from your pay, and the company pays another 7.65%.
Net earnings are 92.35% of profit, because the law first takes off half the 15.3% rate. Neither case reaches the 2026 Social Security wage base of $184,500. The LLC has one owner and no election to be taxed as a corporation. Income tax is left out, and so is the deduction your company takes for the 7.65% it pays.
Becoming a resident changes your return and your company’s options.
In your arrival year, the nonresident column usually applies until your residency start date.
| Nonresident owner | Resident owner | |
|---|---|---|
| Income the US taxes | US income Such as your US business profit | Worldwide income Including income from home |
| Your own return | Form 1040-NR | Form 1040 |
| S corporation | Not allowed No nonresident alien can hold shares | Allowed If every other shareholder also qualifies |
| C corporation | Allowed It may have to file Form 5472 | Allowed |
| Single-member LLC | Files Form 5472 For any year with transactions with you, such as contributions | Usually no Form 5472 Form 5472 covers foreign owners, and a resident alien is not one |
Your E-2 visa tax return for a dual-status year is still a single return, filed on the form for your status on December 31.
Which E-2 rules are easy to miss?
An S election that takes effect too early
An S election can fail if it takes effect before your residency start date. Until that day you are a nonresident alien, and your shares would disqualify the company.
Selling assets at home to fund the investment
If you sell shares or property at home after your residency starts, the US taxes the gain. A sale before your start date generally stays outside US tax.
A company you still own at home
Once you are a resident alien, salary and dividends from your company at home go on your US return. If you own 10% or more of that company, you may also have US filings to make for it, such as Form 5471.
Running your E-2 business from California
California judges residency by its own tests. It presumes you are a resident for a year in which you spend more than nine months there. It also ignores tax treaties that cover only federal tax, so a tie-breaker claim may not apply on your California return.
One CPA can fit your E-2 company’s structure to your residency and prepare every return that follows.
Valim’s CPAs prepare only the US returns, for you and your E-2 company, and work alongside your accountant at home.
- We prepare your company’s return, if it files one, from your bookkeeper’s year-end books. Your Form 1040 or 1040-NR is built from the same figures.
- We plan your move and compare the structures your company can use as your residency changes.
- We work out estimated payments on profit that has no tax withheld.
- Your instant quote counts any company at home you own more than 20% of, plus your foreign accounts and funds.
- When the IRS or your state sends a notice on your company’s return or yours, and we prepared it, we reply within your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
E-2 visa tax questions.
Do non-US citizens pay taxes?
Yes, non-US citizens pay US tax, and residency decides how much of their income it reaches. Green card holders and anyone who passes the substantial presence test are resident aliens, taxed on worldwide income like citizens. Nonresident aliens are taxed only on US-source income and income from a US business. Your visa matters for the day count: every E-2 day counts, while some J-1 days do not.
Can an E-2 visa holder own an S corporation?
E-2 visa holders can own an S corporation once they are resident aliens and every other shareholder qualifies too. A co-owner who is still a nonresident alien, or a holding company, rules it out. In your arrival year, an S election effective before your residency start date can fail. Until then, the business can be an LLC or a C corporation. A single-member LLC files Form 5472 for any year it has transactions with you.
Do E-2 visa holders pay Social Security tax?
E-2 visa holders usually pay Social Security tax, and their company’s structure decides whether it comes as payroll tax or self-employment tax. Payroll tax applies to salary from your own corporation, resident or not, unless a Social Security agreement covers you at home. Once you are a resident alien, profit from an LLC you own alone generally bears 15.3% self-employment tax, up to the wage base. While you are a nonresident, that profit owes none unless a Social Security agreement with your home country applies. O-1 contractors follow the same rule.
Do I pay US tax on a company I still own at home?
Yes, once you are a resident alien. Salary and dividends from that company go on your US return, with a credit for tax paid at home within US limits. If you own 10% or more of it, you may also file Form 5471 for the company each year. Before your residency start date, its income stays outside US tax unless it comes from the US.
Sources
- IRS, Taxation of aliens by visa type and immigration status
- USCIS, E-2 Treaty Investors
- 26 U.S.C. § 7701, Definitions
- 26 C.F.R. § 301.7701(b)-2, Closer connection exception
- 26 C.F.R. § 301.7701(b)-7, Coordination with income tax treaties
- 26 U.S.C. § 1361, S corporation defined
- 26 U.S.C. § 1401, Rate of tax on self-employment income
- 26 U.S.C. § 1402, Definitions (self-employment income)
- IRS, Instructions for Form 5472 (Rev. December 2024)
- IRS, Instructions for Form 5471
- IRS, Publication 519 (2025), U.S. Tax Guide for Aliens
- IRS, Publication 15 (2026), Employer’s Tax Guide
- California FTB, Publication 1031 (2025), Guidelines for Determining Resident Status
Reviewed and updated September 2026. General information, not advice for your situation.