What is the likelihood that H-1B holders will begin their own businesses?
I think it is right. Although the processes are usually complicated or more regulated, the possibility remains. A lot of individuals with specialized skills come to the US on an H1B visa every year.
Most of them possess the potential to run their own business, create their company’s name, and earn extra money apart from working for a US employer.
It is quite often asked to us by H1B visa holders whether they can start their own business while working for a US employer?
You don’t have to lose hope if your dream of starting your own company is being placed on halt because of your H1B visa status.
You can start your business while on an H1B visa if you comply with certain criterion requirements.
Can I Start My Own Business as an H-1B Visa Holder?
Yes, if you are on an H-1B visa status, you are allowed to start your own business.
However, the process is not as straightforward as you think, and while on an H1B visa, you can only operate your business in limited scope as permitted by your visa.
For instance – the H-1B visa allows you to work only for the sponsored company.
So, if you decide to work actively for your own company – managing day-to-day activities, acting in elevated positions such as CEO including managerial or executive position and hiring-firing people in your business, it might lead to revocation of your H-1B status.
You have to be really careful in deciding what you do for your business as an H-1B visa holder. First, decide whether you really want to start your business or not.
If yes, act as a passive investor or passive shareholder in your company. Here is the list of actions you can do to start a business while on your H-1B status:
- You can develop a business model and register your business.
- Gain voting rights in the business as one of the principal shareholders.
- Form a Board of Directors, be on the board, and attend meetings related to the major decisions for the company’s growth.
- Involve yourself in market research for the product or services of your business, including forming a plan.
You do not have to give up on your entrepreneur dream if you are on an H-1B visa. You have to act in a smart manner to carry your dream without violating any of your H-1B conditions.
Generally, we recommend consulting with an experienced immigration attorney and not taking any general information which could lead you into trouble.
To not put your H-1B visa status in jeopardy, you should separate yourself from day-to-day activities in your business, and you should make the major decisions as a principal shareholder and as a member of the board.
You have to play the part of the passive investor who usually takes the big decisions but refrains themselves from the daily operational part of the business.
A quick illustration to make this clearer to you:
- Joseph, an IT specialist and on an H1B visa in the US, wants to start his own business. Joseph was smart and took advice from an immigration attorney and owned 45% of shares of his LLC, while the rest was owned by Joseph’s US partners, who are in charge of running the company and take day-to-day operational decisions. Joseph keeps himself away from doing the operational part, and also, the board of directors has the ability to fire Joseph. The arrangement has good chances that Joseph can live his dream of owning a business without revoking his H1B status.
- Sam, an IT specialist and on an H1B status in the US, started a business in the US where he was the sole proprietor. Sam failed to establish his employer-employee relationship. Further, all the major decisions were taken by Sam, and if he left the business, the business would come to an end. This type of arrangement is not accepted while already on an H1B status.
What About Starting an LLC?
Limited Liability Company or LLC is the most preferred type of company individuals in the US go for because of the fewer formalities involved.
It does not matter whether you are starting an LLC on an H-1B visa or without being on H-1B status. In both cases, you have the ability to incorporate an LLC. You should be aware that if you are on H-1B, the scope of you having control over your company becomes limited.
Can my Own Business Sponsor me for an H-1B Visa?
While USCIS permits you to get sponsored by your own business, you have to meet certain criteria requirements. These are:
Establish a Valid Employer-Employee Relationship
Firstly, you should demonstrate that there exists an employee-employer relationship between the petitioning employer and you (beneficiary), even if you are the owner of the company. The factors that show the employer-employee relationship are:
Right of Company to Hire-Fire you-
Someone in your company should have the right to hire and fire you when needed, such as establishing a board of directors and giving them the power to fire you or having a co-founder owning more than 50% of shares in the company and reserves the right to fire you.
For instance – suppose you owned 70% share in the company and are a part of the board of the company. The bylaws say that at least 50% majority of shareholder’s votes will be required to fire someone at your position and the weight of shareholder’s vote is proportionate to the percentage of their shares in the company. The arrangement is such that you cannot be fired unless you decide to resign. You cannot sponsor yourself in such a situation as the sponsorship will not be bonafide.
The company should continue after firing you-
The situation where you are the major investor in the company, and if you are fired, then the company might get bankrupt explains that the company will never intend to fire you, and so employer-employee relationship will not exist.
When you are a sole proprietor-
When you are the sole owner of the petitioning company, you need to establish valid employer-employee relationship for the purposes of qualifying for valid H 1b visa. Further, sole proprietorship means that you have ownership rights in the company and are controlling it making it harder for you to qualify for H 1b visa requirements.
The company was not created to obtain a visa-
The sponsorship must be bonafide. If USCIS has doubts that the company is started to secure an H1B visa, it will not approve any H1B applications. Applicants in the past have tried to take advantage of this and secure an H1B visa for themselves. Because of that, USCIS scrutinizes each application more heavily than before to determine that the applicant has met the criterion requirements.
H1B Position will still require a bachelor’s/higher degree-
If you want to secure an H1B visa, you have to comply with the normal requirements of the visa. You will not get an exception even if you are currently on an H1B visa. Therefore, a US bachelor’s degree or higher degree or foreign equivalent is required related to the area of job.
The business plan must include the hiring of US workers-
To secure employment of US workers, the business plan of your company should include the hiring of US workers prior to employing foreign workers.
How can I get Income from My own Company While on an H-1B visa?
As you cannot involve in day to day operational activities of your own company while on an H-1B visa, similarly, you cannot draw a salary from any company other than your H-1B sponsored company.
For example – Joseph receives an annual income of $40,000 from an IT company. Joseph starts an LLC with other US partners. Joseph cannot have a salary contract with his own company.
So how can you actually earn from your own startup? Following the limitations of having your own startup on an H-1B visa, you can only earn passive income, such as in the form of investment. To illustrate – Joseph owns 45% of the shares of his own startup.
In the next year, the shares price gets a surge of 28%. Joseph earns a passive income from his startup. You have to pay taxes on your extra income, so make sure to comply with the tax requirements in the US.
What Key Things Should I Keep in Mind While Starting My Own Company?
If you are planning to start your company, you might have a plan to execute that. However, you can take a brief idea from the following steps while considering registering your company in the US:
- You should remain employed with your H1B sponsored employer. That is the basis of your valid visa in the US. Do not leave the H1B sponsor to start your own company as you will eventually lose the status and hence will be deported from the US. Switch your visa to other nonimmigrant visas before deciding to leave the H1B job.
- Have a solid business plan that shows that your business stands a good chance of success in the market.
- Decide which business type you want to incorporate – such as LLC or a corporation.
- Start the business and act as a passive investor or a shareholder that will not affect your H1B status. Find good partners capable of running the business, and you take major decisions rather than indulging in the operational part.
- Register a name for your business that is unique and does not infringe others’ IP rights. You can register your name with local or state offices.
- Decide on a business location where the information regarding taxes and other legal information can be received. Contact the Internal Revenue Service (IRS) to receive your Taxpayer Identification Number and Employer Identification Number.
- Make sure to comply with all the legal requirements for setting up your business, such as having proper licenses and permits for running your business legally. Furthermore, make sure that you follow the regulations related to health codes, workers’ benefits, insurance, taxes, and other issues that can cause legal problems.
- Have a certificate of incorporation for your business.
- Oversee your business success as a passive investor and live your dream of being an entrepreneur.
Do I Need a Lawyer to take care of my Waiver Application?
Herman Legal Group has been working to help individuals live their dream of being an entrepreneur. Our immigration law firm provides various legal services, including online consultations, which you can have access from any part of the world.
Our aim is to create ‘self-do guides’ where people can resolve their immigration problems by themselves. If you still have doubts, you can contact us to talk to one of our immigration attorneys.
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