O-1 or H-1B Founder Moving to the US: Tax on Shares and Company

What changes for an O-1, H-1B or E-3 founder moving to the US?

Once you are a US tax resident, the US taxes your income from everywhere, including shares that vest and a company you own back home. Income from abroad that you receive while resident is taxable even if you earned it before you arrived (Publication 519).

What makes a case not simple: shares that vest across the move, two countries taxing the same income, a company that becomes a CFC or PFIC, and choices that only work before your residency start date. Gather your planned arrival date and every past US trip, the cap table, the share purchase agreement and vesting schedule, any 83(b) filed, valuations at each funding round, and the home company's financial statements.

When does an O-1, H-1B or E-3 founder become a US tax resident?

Your residency starts on a date set by your days in the US, not by your visa. O-1, H-1B and E-3 days all count; only certain diplomats, teachers, trainees, students and charity athletes are exempt (26 U.S.C. 7701(b)). A few days are left out for anyone, such as regular commuting from Canada or Mexico, transit under 24 hours, or being unable to leave because of a medical condition that arose in the US. Which visa you hold matters for immigration, not for this test.

You meet the substantial presence test with at least 31 days in the US this year and 183 days over three years, counting all of this year's days, one-third of last year's and one-sixth of the year before. Your residency then starts on the first day you were in the US that year, not the day you moved. You can leave out up to 10 days of earlier trips only if on those days your tax home was in another country and you had a closer connection to it, and you file the statement Publication 519 describes. A founder who flew in for investor meetings in spring and moved in July can therefore be resident from spring.

A year split into nonresident and resident parts is a dual-status year. The return, and the first-year choice to start residency earlier, are covered in your first year as a US tax resident. If your home country also treats you as resident, a treaty tie-breaker rule may apply (Publication 519).

What happens to founder shares that vest after I move to the US?

Without an 83(b) election, founder shares subject to vesting are taxed when they vest: the value that day, minus what you paid, is pay (section 83(a)). A vest after your residency start date is on your US return in full, even for work done before you arrived (Publication 519).

The source of that pay still matters. Pay earned over several years is sourced by workdays over the period it rewards; for stock options, the regulation uses the period from grant to vest, and for other awards the period depends on the facts (26 CFR 1.861-4). The share earned by work abroad is foreign-source. Your home country may tax that share, and the foreign-source label is what lets a US foreign tax credit relieve it. Shares that vest before your start date are generally not US-taxed if all the work behind them was done abroad.

The split, withholding in both countries and records are covered in stock awards and pay after a move.

Should I file an 83(b) before moving to the US, and is it too late?

An 83(b) election must be filed within 30 days after the shares were issued to you, not after you move (section 83(b)(2); 26 CFR 1.83-2(b)). If you are still inside that window, an election taxes the shares once, at issue, usually with little or no income when you paid full value. Later vests are then not income.

If the window has passed, a late election generally does not count, and the move does not reopen it. Other routes, such as the company changing the vesting terms before your start date, carry their own tax in your home country and are company and legal decisions. Filing, mailing and late-election options are in founder shares that vest.

Will the US tax gains on my shares that built up before I arrived?

Yes, generally. Becoming a resident is not a sale, and the US does not reset your cost to the value on your arrival date. Your basis is generally what you paid (IRS Topic 703), so a sale while resident taxes growth from before and after the move.

For shares that vested after arrival, basis includes the amount you paid and the amount included in income at vesting (26 CFR 1.83-4(b)). For shares that vested while you were a nonresident with no US-taxable income, that regulation does not clearly add the vest-date value; treat this as an open point and keep the valuation at every vest. Canadians may have a treaty election that changes US basis after Canadian departure tax: see moving from Canada to the US and deferring departure tax.

Do I report my foreign company on Form 5471 once I live in the US?

Yes, if you own 10% or more of its vote or value. The Form 5471 instructions make a person who becomes a US person while holding that stake a Category 3 filer, so the arrival year already brings a filing.

Form 5471 is attached to your return. A missing form can cost an initial $10,000 per company per year, and $10,000 for each reportable transaction, such as the arrival-year Category 3 filing. Categories, schedules, family attribution and penalties are covered in US owners of foreign companies.

Could my home company become a CFC or a PFIC, and what did the 2025 law change?

A home company becomes a CFC when US shareholders, each owning 10% or more, together own more than 50% of its vote or value (26 U.S.C. 957). Your move can tip it: count yourself, US co-founders and US investors who each hold that much. A CFC's shareholders can be taxed each year on certain income, including net CFC tested income, with no dividend paid.

A company that is not a CFC as to you can be a PFIC if 75% or more of its gross income is passive, or at least 50% of its average assets produce or are held to produce passive income (26 U.S.C. 1297). Interest is passive income (26 U.S.C. 954(c)), so a startup holding raised cash in deposits, with little revenue, can meet the asset test. For a company that is not a CFC and not publicly traded, assets are measured by value unless it elects adjusted basis (section 1297(e)), so what its technology and other business assets are worth beside the cash matters.

Public Law 119-21 renamed GILTI as net CFC tested income and removed its tax-free deemed return on tangible assets, for tax years beginning after December 31, 2025 (section 70323). It also restored the limit on downward attribution: a US entity is no longer treated as owning stock held by its foreign owner, which can change whether companies in a group with a US subsidiary are CFCs (section 70353). An individual does not get the 40% deduction a US corporation gets on this income unless an election applies; see US owners of foreign companies.

Can my home company owe US tax because I run it from the US?

It can. A company formed abroad stays a foreign corporation however it is managed (26 U.S.C. 7701(a)(4)–(5)), but a foreign corporation with a US trade or business must file Form 1120-F, even when a treaty exempts the income (Form 1120-F instructions).

A company acts through its people. A founder who signs contracts, sells or builds the product from the US can give the company a US trade or business, and a US office can pull some foreign-source income into US tax (26 U.S.C. 864(c)). Under a treaty, business profits are usually taxed only through a US permanent establishment. US branch earnings can also face the 30% branch profits tax, which a treaty may reduce. Whether your work crosses these lines depends on the facts; see when a foreign company files a US return.

Check the home side too. Some countries treat a company as resident where its central management and control is exercised, which the Canada Revenue Agency says "usually" means where the board meets (CRA). Moving the decisions with you can raise a question at home.

How is pay from my home company taxed once I live in the US?

As a resident, all your salary, bonus and director fees are on your US return. Pay for days you work in the US is US-source even when a company abroad pays it (Publication 519), so tax your home country withholds on it may not be creditable unless a treaty sorts it out. With no US withholding, you may need estimated tax payments.

Foreign tax credits, Social Security and Medicare, and fixing double withholding are covered in working in the US for an employer abroad. Dividends from a CFC or PFIC follow the rules in the section above.

What should I do before my US arrival date?

Settle the facts before your residency start date, because the same step can be taxed differently on each side of it. A sale, a dividend, a change to vesting or an entity election made while you are nonresident is taxed under nonresident rules; made later, it is taxed as a resident. Whether any step makes sense depends on your home country's tax as well, so treat this as a list of questions, not actions.

1. Count your US days this year and the two before, and fix your likely start date.
2. Check whether any 83(b) window is still open.
3. Get a valuation as close to the start date as possible, and keep each round's price.
4. Map who owns the home company, including US investors, to test CFC status.
5. Test the home company's income and assets for PFIC status.
6. Decide where contracts are signed and the board meets once you live in the US.
7. List home-company bank accounts you can sign on; see foreign account reporting.

Example

Illustrative only. Each scenario uses the currency stated.

Toronto founder on an O-1 with monthly vesting (Canadian dollars)

She moves on July 1 with no other US days that year. She holds 1,000,000 unvested founder shares, vesting 25,000 a month, worth C$2 each after a seed round. She paid almost nothing for them and filed no 83(b).

• Before July: vests are not on a US return, because the work behind them was done in Canada.
• July to December: six vests of C$50,000 each, C$300,000 in all, go on her US return as pay, converted to US dollars at each vest.
• Source: the shares were issued two years earlier. If the period behind each vest runs from issue to that vest, most workdays behind the July vest were in Canada and that part is foreign-source. The US share grows with each later vest.
• Had she flown in for five days of investor meetings in March, her residency could start in March unless she excluded those days with a closer-connection statement.

Sydney founder on an E-3 who owns 60% (Australian dollars)

She owns 60% of her Australian company and arrives in February.

• Year one: she becomes a US person holding more than 10% and controls the company, so she checks Form 5471 Categories 3, 4 and 5. The company becomes a CFC from her arrival.
• Year two: the company has A$400,000 of tested income and pays no dividend. Her 60% share, A$240,000, can be net CFC tested income on her return, converted to US dollars, unless a high-tax election or other exception changes it.

Bangalore founder on an H-1B with 30% of a cash-rich startup (Indian rupees)

She owns 30% of an Indian startup holding INR 200 million of raised cash in deposits, with INR 10 million of other assets and little revenue. No other US person owns 10% or more.

• CFC: no, US shareholders own only 30%.
• PFIC: if those figures are the assets' values, passive assets are about 95% of the total, so the asset test is met even if the income test is not.
• From her first US year: Form 8621 each year, and a later sale taxed under the PFIC rules unless she made a qualified electing fund election on Form 8621 by her return's due date for the first year it covers; it needs an annual statement from the company.

Different for you?

• You are moving from Canada: both countries' steps are in moving from Canada to the US, and departure tax on shares you cannot sell is in deferring departure tax.
• Your first US return will be dual-status: see first year as a US tax resident, and bring your day count and vesting records to individual tax help.
• You still have time to file an 83(b), or missed it: see founder shares that vest.
• Your home company is or may become a CFC or PFIC: see US owners of foreign companies and get cross-border tax help.
• You run the home company from the US: see when a foreign company files a US return and corporate tax help.
• Investors want a US parent over your Canadian company: see moving a Canadian startup under a Delaware parent.
• Your awards vest across a Canada–US move: see stock awards and pay after a move.
• The home company has bank accounts you can sign on: see foreign account reporting.