"Nonresident alien" is the name the IRS gives to a person who is not a U.S. citizen and who does not pass either of the two tests that turn someone into a U.S. resident for tax. It is a tax status. It is not an immigration status, and it does not depend on what your visa says.
The word "alien" makes people think the label is about nationality. It is not. Two people can hold the same passport, live in the same city, own the same kind of American company, and still land on opposite sides of this line. The only thing that separates them is whether they hold a green card, and how many days they spent inside the United States.
The label matters because almost every other rule for a founder builds on top of it. It decides what income the United States taxes, which return you file, which form a U.S. client asks you to sign before paying you, and which company structures are closed to you.
What the rule actually says
The IRS sorts every individual into one of three groups: U.S. citizen, resident alien, or nonresident alien. Resident aliens are taxed almost the same way citizens are. Nonresident aliens are taxed under a separate set of rules.
You are a resident alien for a calendar year if you meet either of two tests.
- The green card test. You are a lawful permanent resident of the United States at any time during the calendar year.
- The substantial presence test. You were physically in the United States for enough days, counted the way the IRS counts them.
If you are not a U.S. citizen and you meet neither test, you are a nonresident alien. There is no third option and no application. The tests run automatically, and the result is whatever they say.
The day count
The substantial presence test is arithmetic. You pass it if both of these are true:
- you were in the United States for at least 31 days this year, and
- the weighted three-year total comes to 183 days or more.
The weights are these. Days in the current year count fully. Days in the year before count as one third. Days in the year before that count as one sixth.
Here is what that looks like with real numbers. Suppose you visit the United States for 120 days every year. The count is 120 + 40 + 20 = 180 days. That is below 183, so you are a nonresident alien.
Now suppose you visit for 130 days every year instead. The count is 130 + 43 + 22 = 195 days. That is above 183, so the IRS treats you as a resident alien. Nobody sends you a letter when this happens. You are expected to know.
Some days are left out of the count. Days spent as an "exempt individual" are not counted at all. This covers students on F, J, M or Q visas, and teachers or trainees on J or Q visas. The full list of exclusions is on our page about the substantial presence test.
🇺🇸 If the IRS counts you as a U.S. person
This page is not about you. You passed one of the two tests, so the nonresident rules below do not apply.
What that means in practice:
- The United States taxes everything you earn, anywhere in the world, not only what you earn in America.
- You file Form 1040, the same return a citizen files.
- When a U.S. client or platform pays you, they ask for Form W-9, and they normally do not withhold tax from the payment.
- You are allowed to own shares in an S-corporation.
- If you own a single-member LLC, the LLC is ignored for tax purposes and you report its income on your own return.
One trap sits in the green card test. If you hold a green card, this lane applies to you no matter how few days you spent inside the country, even if you lived abroad the whole time. The day count cannot pull you out.
🌏 If it does not
You are a nonresident alien. Here is what changes.
The United States taxes only income connected to the United States. Money you earn from customers in your own country, through your own local company, is outside the U.S. net. U.S.-connected income splits into two buckets, and they are taxed differently. Income from a U.S. trade or business is called effectively connected income, and it is taxed on the net amount at graduated rates. Passive U.S.-source income such as interest, dividends and royalties is called FDAP income, and it is taxed on the gross amount, with the payer withholding the tax before you ever see the money. Both have their own pages in this guide.
You file Form 1040-NR instead of Form 1040.
A U.S. payer asks you for Form W-8BEN, not Form W-9. The form tells the payer that you are a foreign person, which is what triggers withholding at source, and what lets you claim a treaty rate if a treaty applies to you.
Owning a U.S. LLC does not change any of this. You can form a Wyoming or Delaware LLC, get an EIN, and sell to American customers, and you are still a nonresident alien. The company is American. You are not. These are two separate questions.
The single-member LLC has an extra filing. For tax purposes the LLC is still ignored, but a foreign-owned single-member LLC has to file Form 5472 together with a pro forma Form 1120 for any year it has a reportable transaction with you, its owner. A capital contribution, a distribution, or paying the LLC's costs all count, so having no income of its own does not exempt it.
An S-corporation is not available to you. This is worth stating precisely, because most articles get it wrong. It is not a bad idea, and it is not a choice you should think twice about. The statute, IRC § 1361(b)(1)(C), says a corporation cannot be an S-corporation if it has a nonresident alien as a shareholder. The bar follows tax residence, not nationality. A foreign citizen who is a resident alien is allowed to hold S-corporation shares. A foreign citizen who is a nonresident alien is not.
A registered agent has to be hired. The rule that requires an agent inside the state, present during business hours, is a location rule, and you cannot satisfy it from abroad. We cover that on the registered agent page.
Where the two lanes split
| Question | 🇺🇸 U.S. person | 🌏 Nonresident alien |
|---|---|---|
| What the U.S. taxes | Everything you earn, anywhere | Only income connected to the U.S. |
| Personal tax return | Form 1040 | Form 1040-NR |
| Form a U.S. payer asks you for | Form W-9 | Form W-8BEN |
| Single-member LLC you own | Ignored for tax, reported on your own return | Ignored for tax, but Form 5472 plus a pro forma Form 1120 |
| S-corporation shares | Allowed | Forbidden by IRC § 1361(b)(1)(C) |
| Withholding on U.S. payments to you | Normally none | Withheld at source on FDAP income |
| Being your own registered agent | Possible if you have a street address in that state | In practice, no |
| BOI report for a company formed in a U.S. state | Not required | Not required |
Look at the last row, because it is the one people expect to split and it does not. Under the FinCEN interim final rule issued in March 2025, companies formed in a U.S. state are exempt from beneficial ownership reporting. The dividing line is where the company was formed, not where its owners live. A Wyoming LLC owned entirely by people who have never set foot in the United States sits in the same place as one owned by an American.
Common mistakes
🇺🇸 If the IRS counts you as a U.S. person
- Counting days and forgetting the green card test. If you hold a green card, this lane applies no matter how few days you spent inside the country, even if you lived abroad.
- Assuming that because you can elect S-corporation status, your co-founder can too. The bar in § 1361(b)(1)(C) is tested shareholder by shareholder. One nonresident alien on the cap table is enough to disqualify the whole company.
- Treating immigration residence and tax residence as the same question. They are decided by different rules and they can give different answers.
🌏 If it does not
- Reading "alien" as a statement about your passport. It is not. A foreign citizen who spends 130 days a year in the United States becomes a resident alien, and the nonresident rules stop applying.
- Assuming your American LLC makes you an American taxpayer. It does not. Your status depends only on the two tests.
- Electing S-corporation status anyway, or being told by a formation service that you can. The statute does not allow it.
- Treating the label as permanent. It is decided again every calendar year, and the day count reaches back two years, so a busy travel year can flip you without warning.
FAQ
Is "nonresident alien" about my nationality?
No. It is about two tests. You are a nonresident alien if you are not a U.S. citizen and you fail both the green card test and the substantial presence test. Your passport is not part of either test.
I live in Seoul and own a Wyoming LLC. Am I a nonresident alien?
Almost certainly yes, unless you hold a green card or spend a lot of time in the United States. Owning an American company has no effect on your own tax status. The company is American, and you are not.
I visit the United States for 90 days every year. Which side am I on?
Run the count: 90 + (90 ÷ 3 = 30) + (90 ÷ 6 = 15) = 135 days. That is below 183, so you do not meet the substantial presence test. If you also have no green card, you are a nonresident alien.
Can a nonresident alien own shares in an S-corporation?
No. IRC § 1361(b)(1)(C) says a corporation cannot be an S-corporation if a nonresident alien is a shareholder. Note the exact wording: it turns on tax residence, not citizenship. A foreign citizen who is a resident alien may hold S-corporation shares.
What does a U.S. client need from me before paying me?
Form W-8BEN, which states that you are a foreign person. A U.S. person signs Form W-9 instead. The two forms lead to different treatment: payments to a nonresident alien can be subject to withholding at source, and the W-8BEN is also where a tax treaty claim is made.
Do I have to file a BOI report if I am a foreign owner of a U.S. LLC?
Not for a company formed in a U.S. state. The FinCEN interim final rule of March 2025 exempts companies formed in the United States from beneficial ownership reporting. What matters is where the company was formed, not where you live.
Can my status change from one year to the next?
Yes. The tests are run for each calendar year. You can be a nonresident alien one year, a resident alien the next because you travelled more, and a nonresident alien again after that. Because the count includes a third of last year's days and a sixth of the year before, a single heavy travel year can affect your status for three years.
I am an F-1 student in the United States. Am I a nonresident alien?
Usually yes, at least for the first years. Days spent as an "exempt individual," which includes students on F, J, M and Q visas, are not counted in the substantial presence test at all. The exemption does not last forever, and you have to file a form to claim it. See our page on the substantial presence test.