Starting a Company on H1B: Everything You Need to Know
Starting a company on H1B visa is important for entrepreneurs and business owners that may only have temporary ability to work in the U.S. for U.S. employers.3 min read
Updated May 31, 2022:
Starting a company on H1B visa is important for entrepreneurs and business owners that may only have temporary ability to work in the U.S. for U.S. employers. In general, the requirement for an H1B is a job offer for a specialty position in a U.S.-based company (see H-1B application). The worker must also possess a Bachelor's degree or higher that is relevant to the position they want to obtain.
A Labor Condition Application is required for an employee who is going through the process to obtain an H1B. The form basically states that a relationship must exist. The relationship must be referred to as a “the conventional master-servant relationship as understood by common-law agency doctrine.”
Establishing an Employer/Employee Relationship
For a relationship to be established, the employer must prove the right to control the employee. Conditions that must be met include:
- The employer is in control of the daily tasks of the employee.
- The employer provides the equipment that the employee needs to complete their work.
- The employer has the power to hire, pay, and terminate the employee.
- The employee is claimed for taxes.
- The employer has control over how the work is done.
These conditions must be present for as long as the status of the H-1B visa is valid. While the USCIS says that no particular factor will decide termination but that all will be taken collectively to make a decision. Because of this, there is no mandate for or against an H-1B holder starting their own business. As long as they are not violating the terms of their visa, there seems to be no problem.
Though because the stipulation that the holder must only work for the petitioning employer, it is understood that while they can start a business, they may not be able to technically work for it.
Clarification was made in 2010 by the USCIS that stated an H-1B holder can start and work for their business is:
- The holder cannot be the sole proprietor.
- The holder will be treated as an employee even though they have ownership.
- The position must be valid and not just to create a circumstance to obtain the visa.
- The position must require a higher degree.
- The business plan must include the hiring of American workers.
There are a few things to note before attempting this process.
- It can be difficult to set up a board of directors when you are not yet in the U.S.
- You will have to remain a passive shareholder.
- You will never be able to run the business as the CEO. Obtaining this position would require a change of visa status.
- Citizenship or green card status are the best routes to being able to fully run your company.
Steps in Starting a Business on an H1B Visa
When starting a business on an H1B visa, there are certain steps that must be followed:
- You must remain employed with the employer that sponsored your H-1B visa. Even if you start your own business, you will have to stay with the job which got you your visa, or it could be terminated. If you quit, you will have to find a similar job, apply for nonimmigrant status, or leave the U.S.
- Develop a strong business plan to show it can be successful.
- Research different types of business entities.
- Enter into the business as a passive investor or shareholder. You will not be allowed to be a CEO, but you still can have shareholder voting rights.
- Create and register your business name with the local and state offices.
- Contact the IRS to receive an EIN or TIN which will serve as your taxpayer identification number.
- Choose a business location.
- Ensure that you have all licenses, permits, and necessary certifications.
- Make sure you follow all regulations regarding worker's compensations, benefits, insurance, health codes, taxes, and other issues to prevent legal problems.
- Hire someone to run the business since you will be unable to fill this role unless your immigrant status is changed.
- Oversee your business from the standpoint of a passive investor and shareholder without directly participating. You still will have ownership rights, benefit from business gains, and receive dividends.
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