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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
    • Volume 4 - Refugees and Asylees
    • Volume 5 - Adoptions
    • Volume 6 - Immigrants
      • Part A - Immigrant Policies and Procedures
      • Part B - Family-Based Immigrants
      • Part C - Adam Walsh Act
      • Part D - Surviving Relatives
      • Part E - Employment-Based Immigration
        • Chapter 1 - Purpose and Background
        • Chapter 2 - Eligibility Requirements
        • Chapter 3 - Successor-in-Interest in Permanent Labor Certification Cases
        • Chapter 4 - Ability to Pay
        • Chapter 5 - Reserved
        • Chapter 6 - Permanent Labor Certification
        • Chapter 7 - Schedule A Designation Petitions
        • Chapter 8 - Documentation and Evidence
        • Chapter 9 - Evaluation of Education Credentials
        • Chapter 10 - Decision and Post-Adjudication
      • Part F - Employment-Based Classifications
      • Part G - Investors
      • Part H - Designated and Special Immigrants
      • Part I - Family-Based Conditional Permanent Residents
      • Part J - Special Immigrant Juveniles
      • Part K - CNMI Resident Status
    • 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 6 - Immigrants
  4. Part E - Employment-Based Immigration
  5. Chapter 6 - Permanent Labor Certification

Chapter 6 - Permanent Labor Certification

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  • Guidance
  • Resources (28)
  • Appendices (1)
  • Updates (5)
  • History (1)

A. Employer Requirements

A significant percentage of Immigrant Petitions for Alien Workers (Forms I-140) are based on permanent labor certification applications approved by the U.S. Department of Labor (DOL). When adjudicating a permanent labor certification application, DOL does not generally review the beneficiary’s qualifications for the position; this authority and responsibility rests with USCIS. Therefore, officers must assess these petitions to ensure that the position offered is the same or similar to the position that the DOL certified and that the beneficiary meets the qualifications for the position.

1. Applicability

Employment-based 1st preference (EB-1)[1] beneficiaries are not required to be the beneficiaries of approved permanent labor certifications issued by the DOL. Beneficiaries seeking employment-based 2nd preference (EB-2)[2] or 3rd preference (EB-3)[3] immigrant visas, however, generally must be the beneficiaries of approved permanent labor certifications.

2. Individual Permanent Labor Certifications

In general, petitioners filing EB-2 and EB-3 petitions must first obtain an approved permanent labor certification application from DOL on behalf of the beneficiary. An approved permanent labor certification application demonstrates that:

  • The petitioner tested the labor market in the geographic area where the permanent job offer is located to establish that there are no able, qualified, and available U.S. workers who are willing to accept the permanent job offer; and

  • The employment of the beneficiary will not adversely affect the wages and working conditions of similarly employed U.S. workers.

Transition to the PERM Labor Certification System

DOL implemented the permanent labor certification system (PERM) on March 28, 2005, effectively eliminating the previous permanent labor certification system, whereby petitioners had an option to file permanent labor certification applications under supervised recruitment or reduction in recruitment rules.

The DOL PERM final rule, published on December 27, 2004 and effective on March 28, 2005, amended the procedures for obtaining permanent labor certification.[4] DOL approves and issues permanent labor certification applications only after the petitioner has complied with DOL advertising and recruiting requirements and has established that there are no able, qualified, and available U.S. workers for the position and has rejected any U.S. job applicants for valid job-related reasons.

Permanent Labor Certifications filed with DOL on or after March 28, 2005[5]

The Application for Permanent Employment Certification (ETA Form 9089 (PDF)) replaced the Application for Alien Employment Certification (ETA Form 750) in most cases, effective March 28, 2005.[6] ETA Form 9089 details the specifics of the job offer and the beneficiary that were contained in the ETA Form 750 Part A and Part B. The ETA Form 9089 can be filed electronically or by mail.[7]

For the application to be valid, the petitioner, the beneficiary, and the form preparer (if any) must sign the ETA Form 9089. It must also contain the DOL certification stamp and bear the DOL certifying officer’s signature and the certification date.

An approved permanent labor certification is not evidence that DOL has certified that the beneficiary named on the permanent labor certification qualifies for the position. Only USCIS has the authority to determine qualifications for nonimmigrant and immigrant classifications.[8] An approved permanent labor certification means that the petitioner made a good faith effort to test the labor market and demonstrated to DOL that there were no qualified, able, and available U.S. workers for the position.

USCIS determines whether the beneficiary met the minimum education, training, and experience requirements of the permanent labor certification at the time the petitioner filed the application for permanent labor certification with DOL. An immigrant petition for a preference classification is not approvable if the beneficiary was not fully qualified for the classification by the filing date of the permanent labor certification (the petition’s priority date).[9]

B. Validity of Approved Permanent Labor Certifications

1. Validity Period

The validity period for individual permanent labor certifications approved on or after July 16, 2007, is 180 days.[10] Petitioners have 180 calendar days after the date of the approval of the permanent labor certification application by DOL within which to submit the permanent labor certification in support of a petition with USCIS.[11]

USCIS rejects petitions that require an approved permanent labor certification if the permanent labor certification has expired or if the petition is filed without the approved permanent labor certification. USCIS denies a petition that was inadvertently accepted without a required, valid permanent labor certification.

2. Exceptions

USCIS continues to accept amended or duplicate petitions that are filed with a copy of a permanent labor certification that is expired at the time the amended or duplicate petition is filed, if the original permanent labor certification was submitted in support of a previously filed petition during the permanent labor certification's validity period. These filings may occur when:

  • There is a successor-in-interest employer change, which requires a new or amended petition;

  • The petitioner wishes to file a new petition subsequent to the denial, revocation, or abandonment of the previously filed petition, and the permanent labor certification was not invalidated due to material misrepresentation or fraud relating to the labor certification application;

  • The petitioner files an amended petition to request a different immigrant visa classification than the classification requested in the previously filed petition; or

  • USCIS or U.S. Department of State (DOS) determines that the previously filed petition has been lost.

Petitioners may not appeal a USCIS decision to deny a petition that is filed with an expired permanent labor certification issued by DOL.[12]

3. Validity Periods Ending on Weekends or Federal Holidays

The petitioner must file a petition supported by an approved permanent labor certification during the certification’s validity period as established by DOL. Where the last day of a validity period falls on a Saturday, Sunday, or federal holiday, USCIS considers the petition to be timely if USCIS receives it by the end of the next business day.[13] As such, when the last day of the filing period falls on a Saturday, Sunday, or federal holiday, the deadline is extended until the end of the next business day that is not a Saturday, Sunday, or federal holiday.

USCIS considers electronically-filed petitions to be received immediately upon submission; therefore, these filings are not affected by USCIS mailroom closures.

C. Original and Duplicate Permanent Labor Certification Requirements

While photocopies of other initial supporting documents are generally acceptable, the petitioner must submit the original permanent labor certification unless it has already been filed with another petition.[14]

Issuance of a Duplicate Permanent Labor Certification

If the original permanent labor certification has been lost, DOL does not issue a duplicate permanent labor certification to the petitioner but issues a duplicate directly to DOS or USCIS for ETA Form 9089 permanent labor certifications.[15] DOL only issues these duplicates for permanent labor certifications filed on or after March 28, 2005[16] and only at the request of DOS or USCIS.

A beneficiary, petitioner, or a beneficiary’s or petitioner’s attorney or agent must therefore explain the need for a duplicate to USCIS and USCIS may then request that DOL issue a duplicate. DOL retains permanent labor certification information for 5 years and can only issue duplicates during that time frame. The USCIS request must include documentary evidence that a visa application or petition has been filed and must include the U.S. embassy or consulate or USCIS case tracking number that is associated with the visa application or petition.

DOL only sends the duplicate permanent labor certification to DOS or USCIS, regardless of who makes the request.[17] An officer should only make the request to DOL if it is in conjunction with a petition filed with USCIS where the original permanent labor certification has been irretrievably lost or destroyed. The duplicate permanent labor certification must be retained as part of the record of the petition after it is received from DOL and should not be forwarded to the petitioner or the petitioner’s representative.

An officer should not make such a request to DOL if the petitioner’s attorney requested a duplicate permanent labor certification in general correspondence to USCIS, merely because he or she would like a copy for his or her records.

If another beneficiary has used or been substituted on a permanent labor certification that the petitioner claims has been lost or denied, the officer should deny the request for a duplicate permanent labor certification.

D. New Approval of Permanent Labor Certification Required

1. In General

The list of conditions that require the submission of a new original permanent labor certification in support of the petition includes, but is not limited to:

  • The successor entity (petitioner) has not established that a successor-in-interest relationship exists between the successor and the predecessor in accordance with the three successor-in-interest factors;[18]
  • The permanent labor certification is not valid for the new geographic area of the beneficiary’s proposed employment; or
  • There has been any other material change in the job opportunity covered by the original permanent labor certification.

2. Permanent Labor Certification Substitution Changes

As of July 16, 2007, DOL regulations prohibit the alteration of any information contained in the permanent labor certification after the permanent labor certification application is filed with DOL, including the substitution of beneficiaries on permanent labor certification applications and resulting certifications.[19]

E. Revocation of a Permanent Labor Certification

DOL may take steps to revoke the approval of a permanent labor certification if a subsequent finding is made that the certification was not justified.[20] In such instances, DOL provides notice to the employer in the form of a Notice of Intent to Revoke (NOIR) that contains a detailed statement of the grounds for the revocation of the approved permanent labor certification and the time period allowed for the petitioner’s rebuttal.[21]

The petitioner may submit evidence in rebuttal within 30 days of receipt of the notice. If rebuttal evidence is not filed by the petitioner, the NOIR becomes the final decision of DOL.

If the petitioner files rebuttal evidence and DOL determines the certification should nonetheless be revoked, the petitioner may file an appeal within 30 days of the date of the adverse determination.[22] If the permanent labor certification is revoked, DOL also sends a copy of the notification to USCIS and DOS.

Permanent labor certifications remain valid unless and until they are revoked. Officers should provide notice to the petitioner in the form of a Notice of Intent to Deny (NOID) or NOIR if the record reflects that the underlying permanent labor certification has been revoked.[23] This notice gives the petitioner an opportunity to supplement the petition with a valid permanent labor certification. If the rebuttal evidence provided in response to the NOID or NOIR does not include a valid permanent labor certification, USCIS denies or revokes the approval of the petition.

Footnotes


[^ 1] See INA 203(b)(1).

[^ 2] See INA 203(b)(2).

[^ 3] See INA 203(b)(3).

[^ 4] See 20 CFR 656.

[^ 5] Before the new PERM regulation became effective on March 28, 2005, U.S. employers filed the Application for Alien Employment Certification (ETA Form 750) in order to obtain an approved labor certification. Petitioners still use the ETA Form 750 for professional athletes and may submit an uncertified ETA Form 750 or 9089 with a petition seeking a national interest waiver of the labor certification. See Part F, Employment-Based Classifications, Chapter 5, Advanced Degree or Exceptional Ability [6 USCIS-PM F.5] and Chapter 6, Physician [6 USCIS-PM F.6]. The ETA Form 750 has two parts. Part A focuses on the details of the position being certified and describes the name and address of the petitioner, the location of the job opportunity, the proffered wage for the position and the minimum education, training, or experience requirements to successfully perform the duties of the position. Part B focuses on the beneficiary and contains his or her name, date of birth, address, and describes his or her education, training and work history. A valid, approved ETA Form 750 must be signed by the petitioner in Part A and the beneficiary in Part B, contain the DOL certification stamp, and be signed and dated by the DOL certifying officer in the endorsements section on the front page on Part A of the form.

[^ 6] See 20 CFR 656.17.

[^ 7] For more information about filing ETA Form 9089, see the Foreign Labor Certification webpage.

[^ 8] See K.R.K. Irvine, Inc. v. Landon, 699 F.2d 1006, 1008-09 (9th Cir. 1983).

[^ 9] See Matter of Katigbak (PDF), 14 I&N Dec. 45 (Reg. Comm. 1971). See Matter of Wing's Tea House (PDF), 16 I&N Dec. 158 (Act. Reg. Comm. 1977). See the discussions of priority dates at 8 CFR 204.5(d) and 20 CFR 656.30(a).

[^ 10] DOL amended its regulations at 20 CFR part 656 on May 17, 2007, with an effective date of July 16, 2007. See 72 FR 27904 (PDF) (May 17, 2007).

[^ 11] See 20 CFR 656.30(b).

[^ 12] The Administrative Appeals Office (AAO) lacks appellate jurisdiction to review denials based on the lack of a labor certification. See DHS Delegation No. 0150.1 para. (2)(U) (Mar. 1, 2003), which delegated the AAO’s jurisdiction over the decisions listed in 8 CFR 103.1(f)(3)(iii)(B) (PDF) (as the regulations appeared February 28, 2003).

[^ 13] For more information on filing timeframes, see Volume 1, General Policies and Procedures, Part B, Submission of Benefit Requests, Chapter 6, Submitting Requests, Section D, Filing Periods Ending on Weekends or Federal Holidays [1 USCIS-PM B.6(D)].

[^ 14] See 8 CFR 204.5(g)(1). In addition, this regulation provides that an officer may request that other original documents be provided when necessary.

[^ 15] DOL also issues duplicates of lost ETA Form 750 permanent labor certification applications directly to USCIS, upon USCIS’ request. DOL replaced ETA Form 750 with ETA Form 9089 on March 28, 2005, however, ETA Form 750 is still used in certain situations. For more information, see Section A, Employer Requirements, Subsection 2, Individual Permanent Labor Certifications [6 USCIS-PM E.6(A)(2)].

[^ 16] Before March 28. 2005, DOL provided duplicate labor certifications only in response to a written request by USCIS.

[^ 17] See 20 CFR 656.30(e).

[^ 18] See Chapter 3, Successor-in-Interest in Permanent Labor Certification Cases, Section F, Factors for Successorship Determinations [6 USCIS-PM E.3(F)].

[^ 19] See 20 CFR 656.11. Before July 16, 2007, USCIS and DOL allowed U.S. employers to substitute a beneficiary named on a pending or approved labor certification with another prospective beneficiary while maintaining the previously established “priority date.” Labor certification substitution could occur either while the labor certification application was pending at DOL or while a petition, filed with an approved labor certification, was pending with USCIS. Starting July 16, 2007, USCIS began rejecting all petitions requesting labor certification substitution. In the event USCIS inadvertently accepts such a petition, it denies the petition based on being filed without a valid approved labor certification naming the beneficiary.

[^ 20] See 20 CFR 656.32.

[^ 21] See 20 CFR 656.32(b).

[^ 22] See 20 CFR 656.26.

[^ 23] USCIS also provides the NOIR or a Notice of Revocation to beneficiaries who are otherwise eligible and have properly requested to port to a new employer as USCIS considers them affected parties. For more information, see Chapter 8, Decision and Post-Adjudication, Section C, Revocation [6 USCIS-PM E.8(C)].

Resources

Legal Authorities

20 CFR 656 - Labor Certification Process for Permanent Employment of Aliens in the United States

20 CFR 656.11 - Substitutions and modifications to applications

20 CFR 656.17 - Basic labor certification process

20 CFR 656.26 - Board of Alien Labor Certification Appeals review of denials of labor certification

20 CFR 656.30(a) - Priority date

20 CFR 656.30(b) - Expiration of labor certifications

20 CFR 656.30(e) - Duplicate labor certifications

20 CFR 656.32 - Revocation of approved labor certifications

72 FR 27904 (PDF) - Labor Certification for the Permanent Employment of Aliens in the United States; Reducing the Incentives and Opportunities for Fraud and Abuse and Enhancing Program Integrity

8 CFR 1.2 - Definitions

8 CFR 204.5(a)-(l), (n) - Petitions for employment-based immigrants

8 CFR 204.5(d) - Priority date

8 CFR 204.5(g)(1) - Initial evidence

8 CFR 204.5 - Petitions for employment-based immigrants

INA 201 - Worldwide level of immigration

INA 202 - Numerical limitations on individual foreign states

INA 203 - Allocation of immigrant visas

INA 203(b)(1), (2), (3) - Preference allocation for employment-based immigrants

INA 203(b)(2) - Aliens who are members of the professions holding advanced degrees or aliens of exceptional ability

INA 203(b)(3) - Skilled workers, professionals, and other workers

INA 204, 8 CFR 204 - Procedure for granting immigrant status

Forms

ETA Form 9089, Application for Permanent Employment Certification (PDF)

Form ETA-9141, Application for Prevailing Wage Determination (PDF)

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

I-140, Immigrant Petition for Alien Worker

I-290B, Notice of Appeal or Motion

I-485, Application to Register Permanent Residence or Adjust Status

Other Materials

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

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 - Filing Periods and Response Timeframes Ending on Saturdays, Sundays, or Federal Holidays

March 29, 2023

U.S. Citizenship and Immigration Services (USCIS) is updating guidance in the USCIS Policy Manual to address instances where the last day of filing a benefit request or response to a Request for Evidence or a Notice of Intent to Deny, Revoke, Rescind, or Terminate, falls on a Saturday, Sunday, or federal holiday.

Read More
Affected Sections

1 USCIS-PM B.6 - Chapter 6 - Submitting Requests

1 USCIS-PM E.6 - Chapter 6 - Evidence

1 USCIS-PM E.10 - Chapter 10 - Post-Decision Actions

5 USCIS-PM B.2 - Chapter 2 - Eligibility, Documentation, and Evidence (Orphan Process)

6 USCIS-PM B.3 - Chapter 3 - Filing

6 USCIS-PM E.6 - Chapter 6 - Permanent Labor Certification

Technical Update - Incorporating Existing Guidance into the Policy Manual

May 18, 2021

This technical update is part of an initiative to move existing policy guidance from the Adjudicator’s Field Manual (AFM) into the Policy Manual. This update does not make major substantive changes but consolidates and incorporates existing AFM guidance into the Policy Manual, streamlining USCIS’ immigration policy while removing obsolete information. This guidance replaces Chapters 22.1 and 22.2 of the AFM, related appendices, and policy memoranda.

Affected Sections

6 USCIS-PM E - Part E - Employment-Based Immigration

6 USCIS-PM F - Part F - Employment-Based Classifications

Technical Update - Replacing the Term “Alien”

May 11, 2021

This technical update replaces all instances of the term “alien” with “noncitizen” or other appropriate terms throughout the Policy Manual where possible, as used to refer to a person who meets the definition provided in INA 101(a)(3) [“any person not a citizen or national of the United States”].

Affected Sections

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

2 USCIS-PM - Volume 2 - Nonimmigrants

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

10 USCIS-PM - Volume 10 - Employment Authorization

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

12 USCIS-PM - Volume 12 - Citizenship and Naturalization

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, 332.97 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

Technical Update - Replacing the Term “Foreign National”

October 08, 2019

This technical update replaces all instances of the term “foreign national” with “alien” throughout the Policy Manual as used to refer to a person who meets the definition provided in INA 101(a)(3) [“any person not a citizen or national of the United States”].

Affected Sections

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

2 USCIS-PM - Volume 2 - Nonimmigrants

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

10 USCIS-PM - Volume 10 - Employment Authorization

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

12 USCIS-PM - Volume 12 - Citizenship and Naturalization

Archived Content

This content has been superseded by the current version available in the Guidance tab. The historical versions linked below reflect the pertinent policy in effect on that date and dates reflect when updates occurred. The historical versions are provided for research and reference purposes only. USCIS employees should not rely on the historical versions for current laws, precedent decisions, policies, directives, guidance, and procedures.

The History tab was added to the USCIS Policy Manual on June 11, 2021, and provides historical versions on and after that date. For historical versions before June 11, 2021, navigate to the USCIS Policy Manual within the USCIS website at: https://archive.org

Version History:

  • View version archived on May 18, 2021

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