I graduated from a master's program and am waiting for my OPT EAD. I set up a sole proprietorship and got an EIN for freelance work. A potential employer requested a W-9, but as a non-resident alien for tax purposes, I can't use it. What form should I use instead—is the W-8BEN correct? Are freelance contracting agencies usually flexible with this setup, or is it worth setting up an LLC with a US citizen friend to make getting work easier?
You are allowed to freelance through your sole proprietorship on standard ,[object Object],, but because your business income is effectively connected to a U.S. trade or business, you must use Form W-8ECI instead of a W-9 or W-8BEN.
You do not need to set up an LLC with a U.S. citizen friend to make this work. You can operate as a self-employed business owner on standard OPT as long as the work directly relates to your degree and you wait for your ,[object Object], card to arrive. If you later apply for a 24-month STEM OPT extension, this changes: DHS rules do not allow sole proprietorships or self-employment on STEM OPT.
As a non-resident alien, you cannot use Form W-9. That form is for U.S. tax residents.
While many non-resident aliens use Form W-8BEN, it is the wrong form for your freelance business. Form W-8BEN is for passive income. Because you are actively freelancing and running a sole proprietorship in the U.S., your earnings count as effectively connected income.
The IRS requires you to use Form W-8ECI for this income. Handing this form to your clients proves your foreign status and exempts your payments from a flat 30% withholding tax, allowing you to report the profits on your tax return instead.
You asked if agencies are flexible or if you should form an LLC with a U.S. citizen friend. You do not need to change your business structure. A sole proprietorship is perfectly legal on standard OPT. Forming an LLC with a friend does not bypass the tax rules for your share of the income, and standard OPT already allows you to be a self-employed business owner.
