Forming an LLC as an F-1 Student — Anyone Done This?

Question

Hey everyone,

My partner and I are forming an LLC to start investing in real estate. We’ve already drafted our operating agreement and are working on structuring it the right way since I’m an F-1 international student here.

We just wanted to tap into this community:

1. Has anyone here operated an LLC with an international student or foreign national as a passive member? Would love to hear how you structured it.

2. Any Michigan-based attorneys or CPAs you’d recommend who have experience with foreign investors in real estate?

3. Any advice on forming an LLC in general?

Open to any direction. Happy to share more details about our setup if it helps the conversation.

Ashish Acharya · Answer

Pavel, you can be part of an LLC as an F-1 student, but the key issue is how involved you are.

Passive ownership (investing capital and sharing in profits) is generally fine. Where it gets tricky is active participation. Managing properties, making day-to-day decisions, or operating the business can be seen as unauthorized work under F-1 rules.

From a tax side, if you’re a nonresident, the LLC income connected to U.S. real estate is typically effectively connected income (ECI) and will require filing a U.S. tax return. You may also deal with withholding requirements depending on how the LLC is structured.

Many foreign investors structure it so they remain passive and have a U.S. partner or manager handle operations.

It’s a good idea to align both an immigration attorney and CPA early so the structure works on both sides.

Drew Sygit · Answer

You'll need an ITIN, the LLC an EIN.

What citizenship is your partner?

Of more importance, as @Greg Scott mentioned, is your Operating Agreement.

In addition to his points, what happens if one of you dies? Do you really want to deal with crazy heirs or be frozen until their estate is processed?

Greg Scott · Answer

Questions and comments

Did you really mean "passive"?  There are plenty of LLCs that have foreign nationals as passive members, but if you are truly a "silent partner", just forming an LLC is not enough.  You are operating under SEC rules and need a PPM for a syndication.  Those start at about $8K.  I can make recommendations for an SEC attorney.  (I'm guessing you didn't mean "passive")

If your situation is legally challenging, I'd seek out an attorney.  Typically an operating agreement is created by a lawyer, usually as part of your LLC documents. There are plenty of boilerplate operating agreements out there, but you get what you pay for.

I suspect that forming an LLC for a simple partnership is what you want.  That is not that expensive and fairly easy.  However....

If I were you, I would want to talk to an attorney and CPA about possible future scenarios.  What happens if you and your partner get in a dispute?  In your position, what rights do you have to the property?  If the partnership dissolves, what rights do you have?  If you make money, how does that impact your taxes?  If you lose money, how does that impact your taxes?