Hello, What is the actual definition of 'business' in law?
Let me describe a situation and please let me know if this is considered as a;busines-- Le's say an'alie' is working independently on an internet based independent work. He is not a citizen or permanent resident. He is allowed to work only for one employer for full time (h1b etc). Legally this alien is not allowed to form a company, or do a second job.
He is running a web site (or similar technical activity) totally based on his knowledge, ideas and capabilities, he is making significant amount of money (few tens of thousands) from advertisements on the site and subscriptions of the website users. He does it completely on his own (single handedly) in his personal free time from home on weekends and after his full time (h1b) job hours, and without forming any type of business (LLC etc). Running this website is not his second employment since it is being done single handedly in his personal time, and he does not hire/employ other people for running the website. He is accumulating and paying tax for this extra earned money from the website. So will this situation be considered as running a'busines'? Is it legal to do this?
Another work similar to the internet activities that I can mention is - stock trading. Stock trading/investment and income from this is not considered as illegal for any alien (non-citizen or non-permanent resident). Stock trading is not an employment where he gets paid by an employer, and trading is not a business. An alien can make thousands millions of dollars from stock trading if he could, and then pay tax on that income, and it won't be considered as illegal.
Another example is - selling inventions or getting paid for renting his patent or selling it. It is also not an employment, and is not a business.
Obviously there shouldn't be any restrictions (and I guess it is that way) on what someone can do in this personal free time, doesn't matter if he is an alien or citizen. The question is about the possible income out of it and tax pay on that income. So would it be consider as a illegal business? So what exactly is 'business' in the law?
The Self-employment tax would only be if this hypothetical individual took a salary from the business. If however, the individual only took the income distribution from the business, this tax may not apply.
I think this could solve your problem.
dream_big,
You have a lot of point rolled up into one question. The IRS has some resources related to businesses compared to hobbies and the definition of being self-employed.
Running a website can be considered a business. Especially if you have advertisements or revenue generating content such as an online store. Reporting the income on your tax filings are important, but you might also be responsible for Self-Employment Tax.
Since you are on a visa, it would be best to speak with the State Department to seek specific clarification on what you can and cannot do. You do not want to risk losing your visa.
JimD
roccobeatrice | Creator | 9/23/2010 - 3:42 pm
JimD | Former Moderator | 8/16/2010 - 10:43 am
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