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Book outline for Policy Manual
  • Policy Manual
    • Search
    • Updates
    • Table of Contents
    • Volume 1 - General Policies and Procedures
    • Volume 2 - Nonimmigrants
    • Volume 3 - Humanitarian Protection and Parole
      • Part A - Protection and Parole Policies and Procedures
      • Part B - Victims of Trafficking
      • Part C - Victims of Crimes
      • Part D - Violence Against Women Act
      • Part E - Employment Authorization for Abused Spouses of Certain Nonimmigrants
      • Part F - Parolees
      • Part G - International Entrepreneur Parole
        • Chapter 1 - Purpose and Background
        • Chapter 2 - Requirements for Consideration
        • Chapter 3 - Documentation and Evidence
        • Chapter 4 - Adjudication
        • Chapter 5 - Additional Periods of Parole
        • Chapter 6 - Family Members
        • Chapter 7 - Conditions on Parole and Termination
      • Part H - Deferred Action
      • Part I - Humanitarian Emergencies
      • Part J - Temporary Protected Status
    • Volume 4 - Refugees and Asylees
    • Volume 5 - Adoptions
    • Volume 6 - Immigrants
    • Volume 7 - Adjustment of Status
    • Volume 8 - Admissibility
    • Volume 9 - Waivers and Other Forms of Relief
    • Volume 10 - Employment Authorization
    • Volume 11 - Travel and Identity Documents
    • Volume 12 - Citizenship and Naturalization
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  3. Volume 3 - Humanitarian Protection and Parole
  4. Part G - International Entrepreneur Parole
  5. Chapter 2 - Requirements for Consideration

Chapter 2 - Requirements for Consideration

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  • Guidance
  • Resources (16)
  • Appendices (1)
  • Updates (2)
  • History (0)

A. Applicant and Start-up Entity Criteria

An applicant files an Application for Entrepreneur Parole (Form I-941) to be considered for parole as an international entrepreneur. To be considered for such parole, the applicant must demonstrate that a grant of parole will provide a significant public benefit to the United States based on the applicant’s entrepreneurial role with a start-up entity in the United States that has significant potential for rapid growth and job creation.[1]

An applicant need not be outside the United States to apply. Persons outside the United States, persons in the United States in nonimmigrant status, and those who are in the United States not presently maintaining nonimmigrant status may apply.

If their Form I-941 is approved, those applicants who are in the United States would have to depart the United States and would need to appear at a port of entry to request parole into the United States. However, applicants who are in the United States but are not in a lawful status (for example, their Arrival/Departure Record (Form I-94) expired and they are no longer in a nonimmigrant status) may have accrued unlawful presence and may face immigration consequences upon departure from the United States.

1. Applicant Requirements

Central and Active Role

The applicant must have a central and active role in the operations of the start-up entity.[2] Within that role, the applicant must be well-positioned, due to their knowledge, skills, or experience, to substantially assist the entity with the growth and success of its business.[3]

Substantial Ownership Interest

The applicant must also have a substantial ownership in the start-up entity. USCIS considers the applicant to have substantial ownership if the applicant possesses at least a 10 percent ownership interest in the start-up entity at the time of adjudication of the Form I-941.[4] If granted parole, an applicant may reduce their ownership interest below 10 percent during the period of initial parole, so long as the applicant maintains at least a 5 percent ownership interest in the start-up entity during the initial parole period.[5]

While the applicant does not need to be the sole owner, no more than three entrepreneurs may be granted international entrepreneur parole based on the same start-up entity.[6]

2. Start-up Entity Requirements

The applicant’s start-up entity must be:

  • A corporation, limited liability company, partnership, or other entity that is organized under federal law or the laws of any state, and that conducts business in the United States;

  • Not primarily engaged in the offer, purchase, sale or trading of securities, futures contracts, derivatives, or similar instruments;[7]

  • Formed within the 5 years immediately preceding the date the applicant filed the initial parole application and lawfully doing business during any period of operation since its date of formation; and

  • An entity with substantial potential for rapid growth and job creation.[8]

B. Qualified Investment or Government Award or Grant

1. Investment Option

An applicant can demonstrate the start-up entity’s substantial potential for rapid growth and job creation through a qualified investment if, within the 18 months immediately preceding the filing of the Form I-941, one or more qualified investors made qualified investments that together are at least the required amount. The required amount automatically adjusts every 3 years by the Consumer Price Index for All Urban Consumers (CPI-U).[9]

The following table outlines the required amount of investment in the start-up, which varies based on the date the applicant filed the Form I-941.

Required Amount of Investment in the Start-up
Filing Date Investment Amount
Before October 1, 2021 $250,000
On or after October 1, 2021 $264,147

Qualified Investment

To be considered a qualified investment, the investment must be made in good faith and not be an attempt to circumvent any limitations imposed on investments under 8 CFR 212.19. The investment must be lawfully derived capital in a start-up entity that is a purchase from such entity of its equity, convertible debt, or other security convertible into its equity commonly used in financing transactions within such entity's industry.

A qualified investment does not include an investment, directly or indirectly, from:

  • The entrepreneur;

  • The parents, spouse, brother, sister, son, or daughter of such entrepreneur; or

  • Any corporation, limited liability company, partnership, or other entity in which such entrepreneur or the parents, spouse, brother, sister, son, or daughter of such entrepreneur directly or indirectly has any ownership interest.

Qualified Investor

While an applicant is not prohibited from personally investing in the start-up entity or otherwise securing additional funding, only investments from a qualified investor count towards the minimum investment amount.

A qualified investor is an individual who is a U.S. citizen or lawful permanent resident (LPR) of the United States, or an organization that is located in the United States and operates through a legal entity organized under the laws of the United States or any state, that is majority owned and controlled, directly and indirectly, by U.S. citizens or LPRs of the United States.

A qualified investor must also regularly make substantial investments in start-up entities that subsequently exhibit substantial growth in terms of revenue generation or job creation by demonstrating that during the preceding 5 years:

  • The qualified investor made investments in start-up entities in exchange for equity, convertible debt, or other security convertible into equity commonly used in financing transactions within their respective industries comprising a total in such 5-year period of no less than the investment amount in the chart below; and

  • Subsequent to such investment by such individual or organization, at least two such entities each either created at least five qualified jobs or generated revenue of at least the amount in the chart below with average annualized revenue growth of at least 20 percent.[10]

The following table outlines the required amount of investment and revenue for qualified investors’ prior investments, which varies based on the date the applicant filed the Form I-941.

Required Investment and Revenue Amounts for Qualified Investors’ Prior Investments
Filing Date Investment Amount Revenue Amount
Before October 1, 2021 $600,000 $500,000
On or after October 1, 2021 $633,952 $528,293

The term qualified investor does not include an individual or organization that has been:

  • Permanently or temporarily enjoined from participating in the offer or sale of a security or in the provision of services as an investment adviser, broker, dealer, municipal securities dealer, government securities broker, government securities dealer, bank, transfer agent or credit rating agency;

  • Barred from association with any entity involved in the offer or sale of securities or provision of such services; or

  • Otherwise found to have participated in the offer or sale of securities or provision of such services in violation of law.[11]

2. Government Award or Grant Option

An applicant can demonstrate the start-up entity’s substantial potential for rapid growth and job creation through a qualified government award or grant. The applicant must show that, within the 18 months immediately preceding the filing of the Form I-941, the start-up entity received one or more qualified government awards or grants of at least the minimum required amount.[12]

Qualified awards or grants include those for economic development, research and development, or job creation (or other similar monetary awards typically given to start-up entities) made by a federal, state, or local government entity (not including foreign government entities) that regularly provides such awards or grants to start-up entities. Contractual commitments for goods or services do not constitute qualifying awards or grants.[13]

The following table outlines the minimum required amount for government awards and grants, which varies based on the date the applicant filed the Form I-941.

Government Awards and Grants Amounts
Filing Date Award or Grant Amount
Before October 1, 2021 $100,000
On or after October 1, 2021 $105,659

3. Alternative Option

If the applicant satisfies the criteria demonstrating that they are an entrepreneur in a start-up entity but only partially meets one or both of the criteria for qualified investments or qualified awards or grants, USCIS may still consider the applicant for entrepreneur parole if the applicant provides additional reliable and compelling evidence of the start-up entity’s substantial potential for rapid growth and job creation. When considered in totality, the evidence must serve as a compelling validation of the entity’s substantial potential for rapid growth and job creation.[14]

C. Significant Public Benefit

There is no statutory or regulatory definition of significant public benefit.[15] Parole determinations are case-by-case discretionary determinations that consider the totality of the circumstances of each case.

Footnotes


[^ 1] See 8 CFR 212.19(b)(2)(i).

[^ 2] See 8 CFR 212.19(a)(1).

[^ 3] See 8 CFR 212.19(a)(1).

[^ 4] See 8 CFR 212.19(a)(1). For information on the percentage of ownership required for re-parole see Chapter 5, Additional Periods of Parole, Section B, Criteria for Consideration [3 USCIS-PM G.5(B)].

[^ 5] See 8 CFR 212.19(a)(1).

[^ 6] See 8 CFR 212.19(f).

[^ 7] See 8 CFR 212.19(a)(9) (defining U.S. business entity).

[^ 8] See 8 CFR 219.12(a)(2).

[^ 9] See 8 CFR 212.19(l).

[^ 10] See 8 CFR 212.19(a)(5). Qualified job means full-time employment located in the United States that has been filled for at least 1 year by one or more U.S. citizens, LPRs, or other immigrants lawfully authorized to be employed in the United States, who is not an entrepreneur of the relevant start-up entity (or the parent, spouse, brother, sister, son, or daughter of such entrepreneur) nor an independent contractor. See 8 CFR 212.19(a)(6) and 8 CFR 212.19(a)(7).

[^ 11] See 8 CFR 212.19(a)(5).

[^ 12] See 8 CFR 212.19(a)(3) and 8 CFR 212.19(b)(2)(ii)(B)(2).

[^ 13] See 8 CFR 212.19(a)(3).

[^ 14] See 82 FR 5238, 5240 (PDF) (Jan. 17, 2017).

[^ 15] However, 8 CFR 212.19 lists some of the factors USCIS considers when determining whether an applicant’s proposal would provide a significant public benefit to the United States. 

Resources

Legal Authorities

8 CFR 212.19 - Parole for entrepreneurs

8 CFR 274a - Control of employment of aliens

82 FR 5238 (PDF) - International Entrepreneur Rule

86 FR 50839 (PDF) - International Entrepreneur Program: Automatic Increase of Investment and Revenue Amount Requirements

INA 212(d)(5), 8 CFR 212.5 - Parole of aliens into the United States

INA 274A - Unlawful employment of aliens

Forms

AR-11, Change of Address

G-28, Notice of Entry of Appearance as Attorney or Accredited Representative

I-102, Application for Replacement/Initial Nonimmigrant Arrival-Departure Document

I-765, Application for Employment Authorization

I-90, Application to Replace Permanent Residence Card

I-912, Request for Fee Waiver

I-941, Application for Entrepreneur Parole

Other Materials

Consumer Price Index

How to Use the USCIS Policy Manual Website (PDF, 2.99 MB)

International Entrepreneur Parole

Appendices

Appendix: Business Structures

This appendix provides a general overview of the most common business forms or structures of petitioning employers, agents, or sponsors filing an Immigrant Petition for Alien Workers (Form I-140) or Petition for Nonimmigrant Worker (Form I-129). These forms or structures are also relevant to the new commercial enterprises underlying an Immigrant Petition by Standalone Investor (Form I-526) or Immigrant Petition by Regional Center Investor (Form I-526E).

This appendix includes information on how different types of businesses are formed, their fundamental characteristics, the various tax forms that each business organization files with the Internal Revenue Service (IRS), and basic tax terms. Generally, each business form or structure discussed in this appendix should have an Employer Identification Number (EIN), sometimes also called a Federal Tax Identification Number, or IRS Tax Number.[1] An EIN is used to identify a business entity for IRS purposes.

State law generally governs the formation, operation, and dissolution of business entities. As each state has its own rules for business entities, an officer should refer to the relevant state statute or state authority’s website (such as the California Secretary of State’s Business Programs Division) if there is a specific question about a particular business entity.

A. Sole Proprietorship

1. Definition

A sole proprietorship is a for-profit business owned by one person (or a married couple, in some cases).[2] A sole proprietorship is “a business in which one person owns all the assets, owes all the liabilities, and operates in his or her personal capacity.”[3] Owners may operate on their own or may employ other people. The sole proprietorship is the simplest business form under which a person can operate a business. It is not a separate legal entity from its owner;[4] for example, the owner remains responsible for the business debts.

A sole proprietorship can operate under the name of its owner or it can elect to do business under a fictitious name. The fictitious name is simply a trade name and does not create a legal entity separate from the sole proprietor owner.[5]

2. Taxes

Income from the business is included on the owner’s personal income tax return, U.S. Individual Income Tax Return (IRS Form 1040). The profits and losses of the business are recorded and attached to the Form 1040 on Profit or Loss From Business (Schedule C); Supplemental Income or Loss (Schedule E); or Profit or Loss From Farming (Schedule F).

The owner’s adjusted gross income on Form 1040 is used as net income for ability to pay purposes; however, there are no tax forms that list the business’s current assets and liabilities. When determining a petitioner’s ability to pay the proffered wage, USCIS also considers a sole proprietor’s liquefiable personal assets as well as household expenses and other personal liabilities (such as rent, car payments, and child care expenses).

B. Partnership

A partnership is the relationship between two or more persons or entities who join to carry on a trade or business.[6] Each person or entity contributes to the partnership something of value (for example, money, property, labor, or skill) and expects to share in the profits and losses of the business.[7]

A partnership is created automatically when two or more persons or entities engage in a business enterprise for profit whether or not the persons or entities intend to form a partnership.[8] Partners seeking increased accountability, however, may opt to have their arrangement memorialized in a partnership agreement. The following subsections provide an overview of the most common forms of partnerships. The type of partnership is identified at Schedule B, Line 1 of U.S. Return of Partnership Income (IRS Form 1065).

1. General Partnership

A general partnership is the simplest form of partnership, and as such, general partnerships are simply called partnerships.[9] In a general partnership, all partners or owners may equally share responsibilities and liabilities.

A general partnership has the following characteristics:

  • A general partnership is created through an express or implied agreement;[10]
  • A general partnership has two or more partners;[11] and
  • The owners or partners, which may be other types of entities (such as a corporation or limited liability company), are all liable for all legal actions and debts the company faces.[12]

2. Limited Partnership

A limited partnership[13] is very similar to a general partnership, except that the partnership is partially owned by one or more limited partners and is managed exclusively by its general partner(s).[14]

A limited partnership must have at least one general partner. The general partner, often another type of entity (typically a corporation or limited liability company), has management powers, the right to use partnership property, and is personally liable for the debts of the partnership.[15]

Conversely, limited partners do not participate in the management of the business and are generally liable for the partnership’s debts only to the extent of their contributed investment. Limited partnerships permit a person to invest in a partnership while limiting their liability and involvement in its management. In general, a formal written agreement is required to create a limited partnership.[16]

3. Limited Liability Partnership

In a limited liability partnership (LLP),[17] all partners have limited liability similar to that of limited partners in a limited partnership, but without the limitations on control over the company.[18] Some states limit usage of LLPs to certain professions (for example, lawyers).[19]

4. Limited Liability Limited Partnership

A limited liability limited partnership (LLLP) is a modification of the limited partnership.[20] Similar to a limited partnership, the LLLP consists of one or more general partners and one or more limited partners.[21]

In general, the key features of an LLLP are:

  • The general partners manage the business operations of the LLLP, while the limited partners typically only maintain a passive financial interest;

  • It is designed to offer limited liability to all partners in the partnership; and

  • The partners decide the structure of the organization and the distribution of profits and losses. States usually recommend the partners establish a formal, written partnership agreement.[22]

Not every state allows the formation of or recognizes LLLPs.

5. Taxes

The IRS generally considers partnerships to be pass-through tax entities, which means that the partnership itself does not pay income taxes and all of the profits and losses of the partnership pass through the business to the partners, who pay taxes on their share of the profits (or deduct their share of the losses) on their individual income tax returns.[23] Each partner may share in the profits and losses of the partnership equally, or in proportion to their respective contributions to the partnership or as otherwise set out in a written partnership agreement.

Even though the partnership itself does not pay income taxes, it must file U.S. Return of Partnership Income (IRS Form 1065). This form is an informational return the IRS reviews to determine whether the partners are reporting their income correctly.[24] Net income or loss (notated on tax forms as ordinary business income (loss))[25] is found on IRS Form 1065 or Schedule K and net current assets are calculated from information on Schedule L.

C. Corporation

A corporation is a created by filing articles of incorporation with a state. In the eyes of the law, a corporation is a distinct body separate from its owners and management. Accordingly, a corporation is entitled to all legal rights afforded to individual persons, such as the ability to bring and defend lawsuits or to buy and sell property. The corporation’s most notable feature is that, subject to narrow exceptions, it protects its owners (shareholders) from personal liability for its debts and obligations.[26] A corporation also has directors and officers who run the business.

A corporation has perpetual life. When a shareholder dies or otherwise elects to leave a corporation, the shareholder can transfer their stock to others. Corporate shareholders own the corporation, the board of directors manages the corporation through their direction and control of its officers, and, in almost all cases, the officers oversee the day-to-day operations of the corporation. The shareholders elect the directors, who in turn appoint the corporate officers. Often, particularly in smaller corporations, the same person might serve multiple roles within a corporation: shareholder, director, and officer.[27]

A corporation’s shareholders, directors, and officers must observe particular formalities in a corporation’s operation and administration.[28] For example, corporations must, on at least an annual basis, make decisions regarding a corporation’s management by formal vote and must record those votes in the corporate minutes. Meetings of shareholders and directors must be properly noticed and must meet quorum requirements. Finally, corporations must meet annual reporting requirements in their state of incorporation and in states where they do significant business.[29]

1. Subchapter C Corporations

Corporations that have not elected to be taxed as a subchapter S corporation are by default taxed as a C corporation under Subchapter C of Chapter 1 of the Internal Revenue Code (IRC) where the general tax rules affecting corporations and their shareholders are located.[30]

Taxes[31]

A C corporation files U.S. Corporation Income Tax Return (IRS Form 1120). C corporations (and other entities electing to be taxed as C corporations) are the only type of businesses that must pay income taxes on profits.[32] The subsections below discuss how other corporations file and pay their taxes.

Generally, a C corporation’s taxable profits consist of money kept in the company to cover expenses or expansion (called retained earnings) and profits that are distributed to the owners (shareholders) as dividends. These dividends are taxed twice, as the shareholders also pay taxes on these amounts.[33] Net income (taxable income before net operating loss deduction and special deductions) appears on the IRS Form 1120 or 1120-A, while net current assets are calculated from information on Schedule L of IRS Form 1120 or 1120-A.

To reduce taxable profits, a C corporation can deduct many of its business expenses that the C corporation spends in the legitimate pursuit of profit.[34]

2. Subchapter S Corporations

The subchapter S corporation is a variation of the standard subchapter C corporation. The rules for subchapter S corporations are found in the IRC[35] and provide many of the benefits of partnership taxation while at the same time giving the owners limited liability protection from creditors.

An S corporation has the same corporate structure as a standard C corporation. It is a legal entity, chartered under state law, separate from its shareholders and officers, and there is generally limited liability for corporate shareholders. The difference is that the S corporation files an election on Election by a Small Business Corporation (IRS Form 2553), to be treated differently for federal tax purposes.

As with partnerships, the income, deductions, and tax credits of an S corporation flow through to shareholders annually, regardless of whether distributions (dividends) are made. Therefore, income is taxed solely at the shareholder level and not at the corporate level. To qualify for S corporation status, the corporation must meet certain requirements.[36]

Taxes

An S corporation files U.S. Income Tax Return for an S Corporation (IRS Form 1120-S). The corporate income flows through and is reported on the shareholders’ individual tax returns. The corporation completes and files a Shareholder’s Share of Income, Deductions, Credits, etc. (Schedule K-1) with IRS Form 1120-S for each shareholder. The Schedule K-1 tells shareholders their allocable share of corporate income and deductions.

Shareholders must pay tax on their share of corporate income, regardless of whether it is actually distributed. Net income or loss, notated on tax forms as ordinary business income (loss),[37] appears on the IRS Form 1120-S or its Schedule K, while net current assets are calculated from information on Schedule L.

3. Personal Service Corporation

A personal service corporation is a corporation where the employee-owners are engaged in the performance of personal services. The IRC defines personal services as services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting.[38]

To qualify as a personal service corporation, substantially all the corporation’s activities must involve the performance of personal services, and a percentage of the corporation’s stock must be owned by employees performing the personal services.[39]

Taxes

A personal service corporation pays tax on its profits as a corporate entity. However, a personal service corporation is not allowed to use the graduated tax rates for other C corporations. Instead, it is subject to a flat tax based on the highest corporate tax rate. Because of the high tax rate, personal service corporations generally distribute their profits as wages to the employee-shareholders. In turn, the employee-shareholders pay personal taxes on their wages.[40]

The personal service corporation files its taxes on IRS Form 1120. This form contains a box for the business to indicate that it is a personal service corporation.[41] Net income or loss is notated on IRS Form 1120 or 1120-A as taxable income before net operating loss deduction and special deductions, while net current assets are calculated from information on IRS Form 1120 Schedule L.

D. Limited Liability Company

A limited liability company (LLC) is a hybrid entity, combining some of the most advantageous features of partnerships and corporations.[42] LLCs were created to provide business owners with the liability protection that corporations enjoy without the double taxation. Under the default tax standard, earnings and losses of an LLC pass through to the owners and are included on their personal tax returns.[43]

LLCs are similar to S corporations, except that LLCs are not limited in the number of owners or types of members.[44] LLCs may be either member-managed (managed by each of its members) or manager-managed (managed by specified managers who may or may not be members of the LLC).[45] The LLC’s operating agreement may distinguish between members and managing members. Generally, if such a distinction is made, managing members of the LLC are allowed a full participatory role in the business’s operation. However, depending on the operating agreement, even regular members may have a role in the business’s operation.

To set up an LLC, organizers file articles of organization with the secretary of state in the state where the LLC is formed. Some states also require the filing of an operating agreement, which is similar to a partnership agreement. LLCs do not necessarily have perpetual life and can be set up to dissolve after a set period of time, such as a specific number of years, upon the occurrence of a triggering event, such as the death or withdrawal of a member, or as otherwise provided in the operating agreement.

The IRS does not recognize an LLC as a classification for federal tax purposes and by default treats multi-member LLCs as a partnership and single-member LLCs as a disregarded entity (similar to a sole proprietorship) for tax purposes. As with other entities, however, an LLC may file an election to be taxed differently (such as a corporation).[46]

1. Taxes

For federal income tax purposes, LLCs with two or more members are treated by default as partnerships (a pass-through entity) and must file the IRS Form 1065, discussed above under Section B, Partnership. Each partner receives a Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1) for their share of income or losses to be reported on that partner’s individual tax return.

If there is only one member in the LLC, it is treated as a disregarded entity (similar to a sole proprietorship) for tax purposes, and the owner reports the LLC’s income on the owner’s personal individual tax return on Schedules C, E, or F to the IRS Form 1040, discussed above under Section A, Sole Proprietorship.

As an option, LLCs may also elect to be taxed like a corporation by filing Entity Classification Election (IRS Form 8832). They can be treated as a regular C corporation (taxation of the entity’s income before any dividends or distributions to the members and then taxation of the dividends or distributions once received as income by the members), or as an S corporation. These corporations file IRS Form 1120 or 1120-S, discussed above under Section C, Corporation.

E. Non-Profit Organization

1. Overview

A non-profit organization (NPO) is an entity that serves some public purpose and therefore enjoys special treatment under the law, including often having tax-exempt status and the protection of directors, officers, and members from personal liability.[47] Typically, NPOs are engaged in charitable, educational, religious, or artistic activities of public or private interest.[48] Unlike a for-profit business entity, an NPO does not distribute profits to its owners.[49] Instead, any profits must ultimately go back into the organization.

In general, an NPO is formed and governed under state statutes the same as other entity types, and often takes the form of nonprofit corporations or LLCs. Whether incorporated or unincorporated, an NPO must keep records, prepare minutes of meetings, and have a separate bank account.

The board of directors typically makes collaborative decisions regarding the operation of the NPO. The board defines the mission and the policies of the NPO, creates budgets and oversees finances, and hires an executive director. If the NPO has an executive director, the director carries out the daily functions of the NPO under the management of the board. The executive director’s job is also to advise and report information to the board about activities and programs, and to monitor finances.

2. Taxes

An incorporated or unincorporated NPO can qualify for tax-exempt status if it meets certain conditions. In most states, if an NPO qualifies for a federal tax exemption it also automatically qualifies for a state tax exemption. The federal government offers many different types of tax exemptions for non-profits under IRC 501(c).[50] The most popular kind of NPO is called a 501(c)(3).[51] Under this code section, the NPO is exempt from paying federal income taxes and contributions made to the non-profit are generally tax-deductible for the donors.

Most NPOs are required to file an annual informational return, called a Return of Organization Exempt From Income Tax (IRS Form 990 or IRS Form 990EZ), if the organization’s gross receipts exceed $50,000 from sources other than the exempt purpose.[52] Some religious organizations are not required to file IRS Form 990 or 990EZ.[53]

IRS Form 990 provides an analysis of an NPO’s revenue and expenses, and net income is stated on the form as revenue less expenses. The abbreviated balance sheet on IRS Form 990 does not identify which assets and liabilities are current and therefore is not useful for calculating net current assets. 

Footnotes


[^ 1] See IRS’s Employer ID Numbers webpage. For an explanation of what types of business structures require an EIN, see IRS’s Do You Need an EIN webpage.  

[^ 2] For an explanation of married couples and sole proprietorship, see IRS’s Frequently Asked Questions for Entities webpage.

[^ 3] See Black’s Law Dictionary (11th ed. 2019).

[^ 4] See Matter of United Investment Group (PDF), 19 I&N Dec. 248 (Comm. 1984).

[^ 5] See Michael Spadaccini, Ultimate Guide to Incorporating in Any State (Irvine, CA: Entrepreneur Press, 2010), p. 3. For a general overview of sole proprietorships, see Jeffrey F. Beatty and Susan S. Samuelson, Business Law and the Legal Environment (Cengage Learning, 2006), p. 755. See the U.S. Small Business Administration’s (SBA’s) Choose a business structure webpage.

[^ 6] See Section 101 of the Uniform Partnership Act (1997). The Uniform Partnership Act is a uniform act from the National Conference of Commissioners on Uniform State Laws for the governance of partnerships. It has been amended several times since its promulgation, most recently in 2011 and 2013. The Uniform Partnership Act has been enacted by most U.S. states. 

[^ 7] See the IRS’s Tax Information For Partnerships webpage.

[^ 8] See Section 202(a) of the Uniform Partnership Act (1997).

[^ 9] See IRS’s Instructions for Form 1065.

[^ 10] A partnership can also be formed by estoppel (where a party is held out to be a partner and can be held liable for debts or damages incurred by the partnership). See definition of “partnership by estoppel,” Black’s Law Dictionary (11th ed. 2019). A written general partnership agreement usually identifies the names of the partners; the amount and type of contribution made by each partner; each partner’s initial percentage of ownership; the business activities conducted by the partnership; whether and how partnership interests can be transferred; and the conditions allowing dissolution of the partnership. See Section 103 of the Uniform Partnership Act (1997).

[^ 11] See the IRS’s Tax Information For Partnerships webpage.

[^ 12] See Section 306 of the Uniform Partnership Act (1997).

[^ 13] See the Uniform Limited Partnership Act (2001). The Uniform Limited Partnership Act is another uniform act from the National Conference of Commissioners on Uniform State Laws for the governance of partnerships.

[^ 14] See Angela Schneeman, Law of Corporations and Other Business Organizations (Cengage Learning, 2009), p. 114.

[^ 15] See Sections 201 and 404 of the Uniform Limited Partnership Act (2001).

[^ 16] The elements identified in these written agreements include the names of partners, the amount and type of contribution made by each partner, whether the partners hold a limited partnership interest, each partner’s initial percentage of ownership, the business activities of the limited partnership, whether and how partnership interests can be transferred, and the conditions allowing the dissolution of the limited partnership. See IRS Publication 541, Partnerships.

[^ 17] See IRS’s Instructions for Form 1065. See Section 1001 of the Uniform Partnership Act.

[^ 18] See the U.S. SBA’s Choose a business structure webpage.

[^ 19] See IRS’s SOI Tax Stats - Partnership Study Explanation of Selected Terms webpage.

[^ 20] For an example of limited partnerships and LLLPs, see page 21 of the Ohio Secretary of State’s publication, Start a Partnership in Ohio (PDF).

[^ 21] State law created and governs LLLPs. See, for example, page 21 of the Ohio Secretary of State’s publication, Start a Partnership in Ohio (PDF), and State of California Franchise Tax Board’s Limited liability limited partnership webpage.

[^ 22] For a discussion of one state’s LLLP provisions, see pages 21 to 23 of the Ohio Secretary of State’s publication, Start a Partnership in Ohio (PDF).

[^ 23] See IRS’s Tax Information For Partnerships webpage.

[^ 24] The partnership must also provide a Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1) to the IRS and to each partner, which breaks down each partner's share of the business's profits and losses. In turn, each partner reports this profit and loss information on Schedule E of the partner’s individual IRS Form 1040. See IRS’s Instructions for Schedule E.

[^ 25] Negative values are represented in parentheses on tax forms.

[^ 26] See Michael Spadaccini, Ultimate Guide to Incorporating in Any State (Irvine, CA: Entrepreneur Press, 2010), p. 8.

[^ 27] See Michael Spadaccini, Ultimate Guide to Incorporating in Any State (Irvine, CA: Entrepreneur Press, 2010), p. 8.

[^ 28] See William Meade Fletcher, Cyclopedia of the Law of Private Corporations, Vol. 1, section 41.31 (Sept. 2021 Update). See DeWitt Truck Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681 (4th Cir. 1976) (court properly ignored the existence of a corporate entity where there was a failure to follow corporate formalities).

[^ 29] See Wachovia Securities, LLC v. Jahelka, 586 F.Supp.2d 972, 1002 (N.D.I.L. 2008) (disregarding a corporation’s existence when it failed to observe required corporate formalities such as holding regular meetings, taking minutes, and maintaining corporate records).

[^ 30] For instructions on electing a different taxation structure, see IRS’s S Corporations webpage and IRS’s Instructions for Form 1120.

[^ 31] When determining whether or not a corporation has the ability to pay the beneficiary the proffered wage, officers should refer to Volume 6, Immigrants, Part E, Employment-Based Immigration, Chapter 4, Ability to Pay [6 USCIS-PM E.4].

[^ 32] S corporations, partnerships, sole proprietorships, and limited liability companies (LLCs) are not taxed on business profits unless they elect otherwise; instead, the profits pass through the businesses to their owners, who report business income or losses on their personal tax returns.

[^ 33] See IRS Publication 542, Corporations.

[^ 34] In addition to start-up costs, operating expenses, and product and advertising outlays, a C corporation can deduct the salaries and bonuses it pays and all of the costs associated with medical and retirement plans for employees. See IRS’s Instructions for Form 1120.

[^ 35] See 26 U.S.C. 1361.

[^ 36] See IRS’s S Corporations webpage. A subchapter S corporation must be a domestic corporation; have only allowable shareholders (may include persons, certain trusts, and estates, but may not include partnerships, corporations, or non-resident shareholders); have no more than 100 shareholders; have only one class of stock (for example, no preferred stock allowed); and not be an ineligible corporation (such as certain financial institutions, insurance companies, and domestic international sales corporations).

[^ 37] Negative values are represented on tax forms by parentheses.

[^ 38] See 26 U.S.C. 448(d)(2).

[^ 39] See IRS Publication 542, Corporations.

[^ 40] See IRS’s Instructions for Form 1120.

[^ 41] When determining whether or not a corporation has the ability to pay the beneficiary the proffered wage, officers should refer to Volume 6, Immigrants, Part E, Employment-Based Immigration, Chapter 4, Ability to Pay [6 USCIS-PM E.4].

[^ 42] See the U.S. SBA’s Choose a business structure webpage.

[^ 43] While the default tax treatment for an LLC is pass-through taxation, as with all entities, it may elect to be taxed differently.

[^ 44] See IRS’s SOI Tax Stats - Partnership Study Explanation of Selected Terms webpage.

[^ 45] The powers and duties of members and managers are typically outlined in the LLC’s operating agreement. See U.S. SBA’s Basic Information About Operating Agreements webpage.

[^ 46] See IRS’s Limited Liability Company (LLC) webpage. A professional limited liability company (PLLC) is an LLC organized for the purpose of providing professional services, such as a doctor, chiropractor, lawyer, accountant, architect, landscape architect, or engineer. Some states permit LLCs to engage in the practice of a licensed profession through PLLCs. Exact requirements of PLLCs vary from state to state. Typically, a PLLC's members must all be professionals practicing the same profession. In addition, the limitation of personal liability of members does not extend to professional malpractice claims.

[^ 47] See Marilyn E. Phelan, Nonprofit Organizations: Law and Taxation, sections 1:1, 4:1, and 7:1 (Oct. 2022 Update).

[^ 48] See IRS’s Exempt Organization Types webpage.

[^ 49] See Marilyn E. Phelan, Nonprofit Organizations: Law and Taxation, section 1:2 (Oct. 2022 Update).

[^ 50] See 26 U.S.C. 501.

[^ 51] To qualify, the non-profit organization must be organized and operated exclusively for the exempt purposes set forth in IRC 501(c)(3)—charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals—and no part of their net earnings “may inure to any private shareholder or individual.” See 26 U.S.C. 501(c)(3). See IRS’s Exemption Requirements – 501(c)(3) Organizations webpage.

[^ 52] See IRS’s Instructions for Form 990 Return of Organization Exempt From Income Tax.

[^ 53] See IRS’s Instructions for Form 990 Return of Organization Exempt From Income Tax and IRS’s Tax Guide for Churches and Religious Organizations (PDF).

Updates

POLICY ALERT - International Entrepreneur Parole

March 10, 2023

U.S. Citizenship and Immigration Services (USCIS) is issuing policy guidance in the USCIS Policy Manual to address international entrepreneur parole.

Read More
Affected Sections

3 USCIS-PM G - Part G - International Entrepreneur Parole

Technical Update - Moving the Adjudicator’s Field Manual Content into the USCIS Policy Manual

May 21, 2020

U.S. Citizenship and Immigration Services (USCIS) is updating and incorporating relevant Adjudicator’s Field Manual (AFM) content into the USCIS Policy Manual. As that process is ongoing, USCIS has moved any remaining AFM content to its corresponding USCIS Policy Manual Part, in PDF format, until relevant AFM content has been properly incorporated into the USCIS Policy Manual. To the extent that a provision in the USCIS Policy Manual conflicts with remaining AFM content or Policy Memoranda, the updated information in the USCIS Policy Manual prevails. To find remaining AFM content, see the crosswalk (PDF, 350.49 KB) between the AFM and the Policy Manual.

Affected Sections

1 USCIS-PM - Volume 1 - General Policies and Procedures

2 USCIS-PM - Volume 2 - Nonimmigrants

3 USCIS-PM - Volume 3 - Humanitarian Protection and Parole

4 USCIS-PM - Volume 4 - Refugees and Asylees

5 USCIS-PM - Volume 5 - Adoptions

6 USCIS-PM - Volume 6 - Immigrants

7 USCIS-PM - Volume 7 - Adjustment of Status

8 USCIS-PM - Volume 8 - Admissibility

9 USCIS-PM - Volume 9 - Waivers and Other Forms of Relief

11 USCIS-PM - Volume 11 - Travel and Identity Documents

12 USCIS-PM - Volume 12 - Citizenship and Naturalization

Version History

No historical versions available.

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