19 May 2017

Starting a Business by an H-1B Visa Holder

Increasingly, we find that we are answering questions from  entrepreneurial souls who want to start their own businesses to market their great ideas but are hobbled in their goals due to the severe restrictions placed on certain visa classes by USCIS.

The short answer to is it possible for an H-1B visa holder to own his/her own business is that this is a scenario best avoided as there are severe risks to non compliance with the visa status.

H-1B Overview:

Under normal circumstances, the broad H-1B requirements are:

  • A job offer for a specialty position (requiring a bachelor’s degree or higher) from a qualified U.S. employer.
  • A bachelor’s degree or higher that is relevant to the position.

The biggest challenge for self owned enterprises is meeting the requirement that there be an employer-employee relationship. This relationship is coined “the conventional master-servant relationship as understood by common-law agency doctrine”. In order to establish this relationship, the employer must prove their right to control the employee.

The right of control can be broken down into several conditions:

  • Does the petitioning employer supervise the employee’s work?
  • Can the employer control the daily tasks of the employee?
  • Does the employer give the employee the equipment needed to complete his or her tasks?
  • Does the employer have the power to hire, pay, and fire the employee?
  • Is the employee claimed for taxes?
  • Are there any benefits provided by the employer such as insurance or bonuses?
  • Can the employer control exactly how the work is done?

These conditions must also continue as long as the employee is under H-1B status for that particular employer. The USCIS has made it a point to say that no one factor will be decisive, but rather that each will be weighed for or against the decision.

Is a self employed H-1B possible?

US Citizenship and Immigration Services (USCIS) in January 2010, issued a memorandum https://www.uscis.gov/news/questions-answers-uscis-issues-guidance-memorandum-establishing-employee-employer-relationship-h-1b-petitions

This memo clarified the regulations surrounding entrepreneurship stating that an H-1B holder can start a business and also work for it, provided that:

  • A board of directors, CEO, or similar entity has the power to hire, pay, and fire the beneficiary. Therefore, the nonimmigrant will be treated like an employee despite having ownership.
  • The H1B holder is not the sole proprietor of the company
  • The position in question must be bona fide, meaning that the company cannot have been started for the purpose of securing an H-1B visa.
  • The position must still require a relevant bachelor’s degree or higher.
  • The company should have a business plan that includes the purpose of hiring qualified American workers. This is because the 2010 memorandum was created so that more U.S. workers could find employment.

In order to be successful as an owner/employee, it is essential to have a board of directors with complete, unfettered control to hire, supervise, set compensation, and terminate the owner. No, you cannot create a board of family and friends who are effectively “dummy directors” in that their only role is to essentially rubber stamp and go along with all of your plans. This MUST be a truly functioning board with complete autonomy to do their job in the best interest of the entity. USCIS looks upon such petitions with extreme suspicion, and will investigate such applications.

Can I, as an H-1B holder, start my own separate company?

Restrictions on Entity Type:

As a Non-US Resident, the only type of entity that you can incorporate in the US, is a C Corporation. While it is possible for H-1B visa holders to start an entity as a C corporation

Restrictions on your activities for the entity:

As an H-1B visa holder you cannot run or work for the company if your H-1B is through a different employer. You can only be a passive investor i.e. invest the money, and then refrain from making any business decisions. As the owner/investor, you can appoint a director or CEO to run your business, but you yourself, cannot be involved in any day-to-day operations or perform any task(s) that would constitute work.

How We Can Help:

Because the issue of whether or not an H-1B holder can start a business is fraught with strict regulations that could seriously impact your status or petition if broken, seeking the counsel of an experienced immigration attorney is an absolute must, as the consequences of making a mistake in these situations can be very high.

Our lawyers specialize in providing foreign professionals and entrepreneurs with the guidance they need to secure and maintain H-1B status as well as many other non-immigrant visa situations. Please do not hesitate to contact us should you have any questions.

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