27
any additional corporate earnings as “wages.”
26
Unfortunately, under U.S. tax law, S corporations cannot
have a “nonresident alien as a shareholder,”
27
which
means that undocumented individuals are not eligible to
apply for S corporations or be part of one.
Personal Information Required: An EIN (discussed in
the tax section of this guide) must be obtained to start
a corporation. A corporation is formed under the laws of
the state in which it is registered. To form a corporation
an individual will need to establish their business name
and register their legal name with the state government.
If they choose to operate under a name different from
the officially registered name, they’ll most likely have to
file a DBA. State laws vary, but generally corporations
must include a corporate designation (Corporation,
Incorporated, Limited) at the end of the business
name. Note: even though employment authorization
is not required to form a corporation, there may be
additional requirements in the formation process that
may require an SSN. We encourage consulting with
a trusted attorney and the local city clerk for specific
requirements.
Liability: C corporations limit the personal liability of
directors, shareholders, employees and officers. Legal
obligations of the business cannot become personal
debt obligations of any individual associated with the
business.
Taxes: Although requirements vary by jurisdiction,
C corporations are required to file state, income,
payroll, unemployment and disability taxes. One major
downside of C corporations is the double taxation
that occurs. After deducting business expenses and
salaries, the remaining income is subject to tax. This
net income is also distributed to shareholders in the
form of dividends. These dividends are income to the
shareholder and are reported on the individual’s tax
return. Therefore, profits from a C corporation are
taxed at the corporation’s tax rate and individual’s tax
rate. Only net income retained by the C corporation
temporarily avoids double taxation.
28
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a business
structure allowed by state statute that provides the
limited liability features of a corporation and the tax
efficiencies and operational flexibility of a partnership.
26 https://www.sba.gov/starting-business/choose-your-business-structure/s-corporation
27 http://uscode.house.gov/view.xhtml?req=(title:26%20section:1361%20edition:prelim)
28 For more information about taxes you may be liable for and the forms needed for corporations, see https://www.irs.gov/businesses/small-businesses-self-
employed/corporations
Owners of an LLC are called members. Most states do
not restrict ownership, and so members may include
individuals, corporations, other LLCs and foreign
entities. There is no maximum number of members.
Most states also permit “single-member” LLCs, those
having only one owner. Each state may use different
regulations, and you should check with your state if you
are interested in starting a Limited Liability Company.
Immigrants, regardless of legal status, and even entities
based outside of the U.S. may form and own an LLC.
However, additional information or licenses may be
required by your state or local jurisdiction. This section
provides a general overview of LLCs. We encourage
individuals to research the specific aspects of forming
an LLC in their current jurisdiction and seek advice from
an attorney familiar with local laws.
Starting an LLC as a Worker Cooperative
Definition: A worker cooperative is a business
composed of members who are both workers and
owners of the business. Members can control the
structure and practices of the work environment.
Businesses who hire a worker cooperative are hiring the
cooperative not a single member, therefore, they are
Celia Serrato’s Story
“I would encourage people
who want to start a
business to just do it. If
you are passionate about
it and doing it for the right
reasons, then you’re going
to make it happen.”
Born in Michoacán, Mexico,
Celia Serrato is a student
at Santa Ana College and part of UndocuScholars
Fellowship and IDEAS Club. Celia is also co-owner
of HerbalHermanasCo. Her products are included
in Caja Latina, a monthly subscription box that
celebrates the intersectionality of Latinx identity. Celia
is frequently seen at MujeresMarkets in Downey and
Los Angeles, pop-up markets that feature WOC/
QTPOC creators and artists. HerbalsHermanasCo
was recently featured as one of the ‘10 Latina-
Owned Businesses You Need on Your Radar’ by
hiplatina.com. Watch Celia’s Story