Can I keep my US LLC or S-corp after I make aliyah?
Yes, but the entity comes with you in a way you may not expect. Picture a US consultant who moves to Israel and keeps invoicing clients through the same US LLC. From the Israeli side, once she runs that company day-to-day from her apartment in Tel Aviv, the Israel Tax Authority can treat the company itselfas an Israeli tax resident under the "management and control" test, taxable in Israel on its worldwide income7. From the US side, becoming a nonresident alien can break her S-corp election outright1. And the new-immigrant 10-year exemption she was counting on does not cover the income her own work in Israel generates. A lifelong Israeli running a plain Israeli company faces none of this layered, two-country mess; she does, because the entity followed her across the border.
Not advice
How can a US company become an Israeli tax resident just because I moved?
Because Israel does not decide a company's residence by where it was incorporated alone , it also asks where the business is managed and controlled. An entity is an Israeli tax resident if it was incorporated in Israel or if the control and management of its business are exercised from Israel, and an Israeli-resident company is taxed on its worldwide income7. Your Delaware certificate does not insulate you. If the strategic and operational decisions, signing contracts, directing the work, deciding what the company does next, happen from your desk in Israel, the substance of where the company is run points to Israel, regardless of the registration state.
Almost every solo founder is blindsided by exactly this: they assume "it's a US company, so it's a US tax matter," when a single-owner LLC or small S-corp is managed entirely by one person, them, and that person is now sitting in Israel. There is no board in Wilmington making the calls. The result is a genuine dual-residency risk: the US still treats a US-formed entity as a US entity, while Israel can claim it as an Israeli resident through management and control. The מס הכנסה (Mas Hachnasa) consequences flow from that overlap, not from any single rule.
Why does my S-corp election break when I move to Israel?
Because US law forbids an S corporation from having a nonresident-alien shareholder, and moving abroad can turn you into one. The IRS lists the S-corporation eligibility requirements plainly: an S corporation must have no more than 100 shareholders, only one class of stock, and shareholders that "may be individuals, certain trusts, and estates and may not be partnerships, corporations or non-resident alien shareholders"1. The nonresident-alien prohibition is the one that bites olim.
The trap is that the rule keys off US tax status, not citizenship. A US citizen who makes aliyah stays a US citizen and a US person, so a US-citizen shareholder does not, by the act of moving, become a nonresident alien, that is the reassuring case. The danger is the green-card holder or the dual national whose US status lapses, and especially the situation where one of several shareholders is a non-US spouse or partner who becomes a nonresident alien. The instant a single ineligible shareholder holds stock, the corporation no longer meets the S-corporation requirements1, the election can terminate, and the company reverts to being taxed as a C corporation, which, for a US person living in Israel, drops you straight into the controlled-foreign-corporation machinery discussed below.
What happens to a single-member LLC after aliyah?
A single-member LLC is, by default, a disregarded entity, the IRS does not see a separate taxpayer at all, so the income is simply yours. The IRS states it directly: "an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation"2. The same default applies to a multi-member LLC, which is a partnership unless it elects corporate status on Form 8832 or S-corp status on Form 25533. You report a disregarded LLC's profit on your own return, on Schedule C, E, or F, as if the company were not there2.
That "the income is just yours" quality is what makes the LLC dangerous in Israel. If you perform the work in Israel, writing the code, advising the client, doing the consulting, the income that flows through the disregarded LLC is Israeli-source active business income, earned by your personal labor on Israeli soil. The same logic runs the other way on the US side: because the entity is disregarded, it is you, not a separate company, who is treated as carrying on the trade or business and earning its income5. There is no foreign company standing between you and that income to make it "foreign." To the Israel Tax Authority you look like an עוסק מורשה (Osek Murshe), a self-employed person carrying on a trade in Israel, and you are taxable here on that income from day one, exemption or not. Many olim treat the LLC as a tidy way to "keep the US business separate." For Israeli tax it does the opposite: it pins the income to you.
Does the 10-year exemption shelter my LLC or S-corp income?
Not the part you earn by working in Israel. The new-immigrant exemption is generous, but it is an exemption for income and assets whose source is outside Israel, for ten years from your aliyah date, foreign salary, business and professional income, interest, dividends, rent, royalties, and foreign capital gains are exempt8. The decisive word is foreign-source. Income you generate by your own activity physically performed in Israel is Israeli-source income, and Israeli-source income was never inside the exemption. Where you push the buttons, not where the client's bank is, drives the sourcing.
So the line runs through your own working hours. Passive returns from a genuinely foreign business you do not run from Israel, a US rental property, a portfolio, a stake in a company someone else operates abroad, sit comfortably inside the 10-year exemption8. Active income you create by consulting, building, or advising from your home in Israel through a US LLC or S-corp does not. The entity does not change that sourcing; if anything, a disregarded LLC makes the Israeli-source nature of your own labor more obvious, not less.
2026 reporting reform, note before you rely on the exemption
What is the CFC / GILTI problem if I keep a US corporation?
If your entity is taxed as a US corporation, a C-corp, an S-corp whose election broke, or an LLC that elected corporate treatment, and you are a US person owning it from Israel, you can be hit with US tax on the company's undistributed profit each year through the controlled-foreign-corporation (CFC) and GILTI rules. A foreign corporation owned by US shareholders becomes a CFC, and a US shareholder of a CFC must include its global intangible low-taxed income (GILTI) in gross income each year under section 951A, computed and reported on Form 89924. In plain terms: profit that stays inside the company can still land on your personal US return before you ever take it out.
Here is the cross-border mismatch a native Israeli never meets. Israel may tax the company as an Israeli resident through management and control7. The US may simultaneously reach the same profit through GILTI on your personal return4. The two systems do not automatically net to zero, they measure different bases, in different currencies, on different timelines, and the foreign-tax-credit relief that is supposed to prevent double tax is partial and notoriously fiddly for owner-managed CFCs. You can end up filing a US corporate-information return, a GILTI calculation, an Israeli company return, and your two personal returns for one small consulting business.
| Your entity, after aliyah | US tax treatment | Israeli exposure (if managed from Israel) |
|---|---|---|
| Single-member LLC (disregarded) | Income flows to you personally on Schedule C/E/F; you pay US tax as the owner2 | Work done in Israel = Israeli-source active income, taxable in Israel; not covered by the 10-year exemption8 |
| S-corporation | Election can terminate if any shareholder becomes a nonresident alien; reverts to C-corp taxation1 | Company may be an Israeli-resident company via management & control; taxed on worldwide income7 |
| C-corp / LLC electing corporate status | Becomes a CFC for a US-person owner; annual GILTI inclusion on Form 89924 | Also potentially Israeli-resident via management & control, dual corporate residence7 |
| Foreign business you do NOT run from Israel (passive stake) | Standard US rules; CFC/GILTI only if US-person ownership crosses the thresholds4 | Foreign-source, sits inside the 10-year exemption (now report-but-exempt from 2026)8 |
Knowledge Check
You run a single-member US LLC and do all the consulting work from your apartment in Israel. How is that income treated for Israeli tax?
How is this different from what a US citizen oleh faces vs other olim?
Every oleh who keeps an active business abroad faces the Israeli-source and management-and-control questions, but the US passport stacks an extra entity layer on top. A US-citizen oleh stays a US person for life, so the S-corp shareholder rules, CFC/GILTI inclusions, and US information returns keep running in parallel with the Israeli analysis4. Olim from countries that end home-country obligations on non-residence usually shed most of their home corporate-tax exposure once they leave, but none of them escape Israel's management-and-control test if they keep operating the company from here.
Is my operating company a PFIC? No.
You can keep a US LLC or S-corp after aliyah, but the entity follows you across the border and stacks two-country tax exposure a native Israeli never faces. If you run the company day-to-day from Israel, the Israel Tax Authority can treat the entity itself as an Israeli tax resident under the "management and control" test, taxable on its worldwide income, no matter that it is registered in Delaware. Your S-corp election can break the moment any shareholder becomes a nonresident alien, since US law forbids an S corporation from having a nonresident-alien shareholder. A single-member LLC is a disregarded entity, so its income is simply yours; work you perform in Israel through it is Israeli-source active income, taxable in Israel from day one and not sheltered by the 10-year new-immigrant exemption, which only covers foreign-source income generated outside Israel. If you keep a US corporation, the CFC and GILTI rules can tax the company’s undistributed profit on your personal US return each year. For olim who become Israeli residents from 1 January 2026, even genuinely exempt foreign income must now be reported. This is education, not advice: decide your structure with a qualified US-Israel cross-border professional before you start billing from Israel.
Not from your move alone. A US citizen stays a US person, and a US-person shareholder is not a nonresident alien, so a wholly US-citizen-owned S-corp can keep its election after you move. US law forbids an S corporation from having a nonresident-alien shareholder, so the election breaks when an ineligible shareholder appears, for example a non-US spouse who is a nonresident alien, or a partner whose US status lapses. The Israeli management-and-control and income-sourcing issues, though, apply to you regardless of your US status.
No. Israel looks at substance, not the certificate of incorporation. A company managed and controlled from Israel can be an Israeli tax resident even though it is US-registered, and an Israeli-resident company is taxed on its worldwide income. A nominal US registered agent or mailing address does not move the management. If the decisions and the work happen in Israel, the paper trail in Delaware does not change the Israeli analysis.
For US income tax, largely yes. A single-member LLC is a disregarded entity, treated as not separate from its owner unless it files Form 8832 to elect corporate treatment, so you report its income on your own return on Schedule C, E, or F. That is exactly why it offers no Israeli-source shelter: with no separate taxpayer between you and the income, work you do in Israel through the LLC is your own Israeli-source income. It still exists for liability purposes and for some US employment and excise purposes, just not as a separate income-tax payer.
It can, if the company is genuinely a foreign company you do not run from Israel, because a dividend from a foreign corporation is foreign-source income that sits inside the exemption. But if you manage the company from Israel, Israel may treat it as an Israeli-resident company, which changes the character of what it pays you, and for olim resident from 1 January 2026 the income is reportable even when it remains exempt. As a US owner you may also face GILTI on undistributed profit before any dividend is paid.
GILTI, global intangible low-taxed income, is a US rule that makes a US shareholder of a controlled foreign corporation include the company's qualifying profit in personal gross income each year, whether or not it is distributed, reported on Form 8992 under section 951A. For an oleh who owns a US-taxed corporation while living abroad, it means the company's retained earnings can be taxed to you currently, which is why owner-managed corporations are often the worst structure to carry into Israel without professional advice.
If you are a US person with signature authority or a financial interest in non-US accounts, including your company’s Israeli or other foreign accounts, you file the annual FBAR (FinCEN Form 114) once their combined value tops $10,000 at any point in the year. This is separate from any income tax and from the entity questions; it is a pure reporting duty that follows the US person, not the company.
There is no single answer, because it depends on who the shareholders are, where the work happens, and which passports are involved, which is precisely why this is an advice-required decision. The general direction many cross-border advisers explore is matching the entity to where the work actually is, often an Israeli osek murshe registration for Israel-performed work, and not dragging an owner-managed US corporation into Israel by accident. Decide this with a US-Israel professional before, not after, you start billing from Israel.
