Legal Question in Business Law in California

Here are my thoughts:

1. If you are going to let a business associate (don't call him/her a partner unless the business is to be a general partnership) run your company, you should have a comprehensive written agreement with him/her and do a periodic check-up to make sure things are being managed according to your agreement.

2. As a non-resident alien, you can participate in either a corporation or an LLC without violating tax or business laws. However, if the business is a corporation, it must remain a "C" corporation and cannot become an "S" corporation.

3. It's not within my expertise to know how you'd prove passive investor status. Sorry.

4. Most LLCs have the option of electing to be taxed as a corporation or as a partnership.

5. I recommend setting up business organizations in the same state where it is operated, because if you operate in California to any significant extent, you'll be required to register, report and pay taxes here anyway. There are advantages to Delaware, Nevada, Maine, etc. incorporations or LLC filings for very large and complex businesses that have numerous owners and large cash flows, but for the average new small business, keeping books for two or more states and filing taxes in those extra states just makes unnecessary work and expense for the owner(s).

I recommend asking your consulate or the U.S. Immigration and Naturalization folks about the passive activity requirements and how you meet them.