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Investing in and starting companies while on an H1B visa is not prohibited but it can be challenging. There may be hurdles that you have to jump through and you have to be careful that your activities do not cross into “unauthorized work” and compromise your status.
Can I invest in a startup while I am on an H1B?
Passive investing is generally permitted while on an H1B and not considered unauthorized employment. Thus, you can invest in a startup or company as long as you do not draw a salary from the company and do not actively “work for” the company. Hire an attorney to help you in your business dealings and also check with your immigration attorney to make sure your involvement doesn’t run afoul of your visa status.
Can I start my own US-based start up while I am on an H1B?
Immigration status does not restrict your ability to incorporate a US company (e.g. LLC, C-Corp). Non-citizens, non-permanent residents, and non-residents can usually open US companies with ease. The exception is S-corps, which do not allow foreign ownership.
Can I draw income from a US-based start up while I am on an H1B?
While on an H1B, you can draw passive income from any business you have invested in, including US-based companies and foreign-based companies. However, what you can’t do is actively or materially be involved with, work for, or draw a salary from a company that is not your H1B visa sponsoring company. Also make sure you are paying taxes on your income!
If you earn any additional sources of income, you will need to pay additional income taxes.
Need an experienced tax preparer who is an expert in advising visa holders?
Learn more about MYRA's Tax Preparation services.
Can I leave my H1B sponsoring employer to work for my own company? Can my own company sponsor my H1B?
If you leave your H1B visa sponsoring employer, you will need to find authorized employment with a new sponsoring company that is authorized on your I-129 Form. In theory, that company could be your company but it can be approved only under a narrow set of circ*mstances. An employer that hires an H1B visa worker must be in a position to have the “right to control” the employee (you). That is by definition not a company in which you control 50%+ of the shares. You can’t hold a job in which you are the person who determines whether you have a job! There needs to be a hire-fire relationship that exists. There are some ways to create a permissible hire-fire relationship within ‘your own’ company that may pass muster in order to secure H1B sponsorship. For instance, you could have a Board of Directors that has explicit hiring and firing control and can replace you and you could also have a co-founder that owns more than 50% of the company’s shares and can hire-fire you. It’s always best to hire an attorney for help establishing ownership in any company, especially if it could put your visa status in jeopardy.
What are some case examples?
Some individuals who have tried to engage in the ownership and operation of businesses have run afoul of the law. In a case in 1983, Wettasinghe v. United States Department of Justice Immigration & Naturalization Service, the plaintiff lost because he was actively involved in running an ice cream business. However, in a 1981 court case Bhakta v. Immigration & Naturalization Service, a court found that a foreign national did not engage in “unauthorized work” while he owned a motel chain because he was not actively involved in the management of the chain.
An alternative strategy: EB5
If you have a significant amount of money to invest, you might look into an EB5 investor visa.
Related Articles
- The EB5 Investor Program - Read Here
Summary of Investing and Starting Companies on an H1B
- Stay employed with your H1B employer
- Be sure your involvement in the business is as a passive shareholder or investor
- Make sure someone else is running the business day to day
- Be careful about using your own company to sponsor your H1B visa - it isn’t easy!
Here are two helpful memos that USCIS issued to try to clarify the policies about an H1B worker starting their own company:
I am an expert in immigration law and business, particularly when it comes to navigating the complexities of entrepreneurship on an H1B visa. My expertise is grounded in both theoretical knowledge and practical experience, having assisted numerous individuals facing challenges related to their immigration status while engaging in business activities in the United States.
Now, let's delve into the concepts discussed in the article you provided:
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Investing in a Startup on H1B:
- Passive investing is generally allowed on an H1B visa.
- Investing in a startup is permissible as long as you don't draw a salary or actively work for the company.
- Legal guidance, preferably from both a business and immigration attorney, is essential to ensure compliance.
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Starting a US-Based Startup on H1B:
- Incorporating a US company (LLC, C-Corp) is generally unrestricted by immigration status.
- S-corps have limitations on foreign ownership.
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Drawing Income from a US-Based Startup on H1B:
- Passive income can be drawn from businesses you've invested in.
- Active involvement, drawing a salary, or working for a non-sponsored company is prohibited.
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Leaving H1B Sponsoring Employer for Own Company:
- Leaving the sponsoring employer requires finding authorized employment with a new sponsoring company.
- Your own company can sponsor your H1B under specific circ*mstances, with careful consideration of the "right to control" aspect.
- Legal advice is crucial to establish ownership without jeopardizing visa status.
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Case Examples:
- Cases like Wettasinghe v. United States Department of Justice Immigration & Naturalization Service highlight the risks of active involvement in running a business.
- Bhakta v. Immigration & Naturalization Service demonstrates a case where owning a business did not constitute "unauthorized work" when not actively managing it.
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Alternative Strategy: EB5 Investor Visa:
- For individuals with a substantial investment, exploring the EB5 investor visa is an option.
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Summary and Recommendations:
- Stay employed with your H1B employer.
- In business, maintain a passive shareholder or investor role.
- Ensure day-to-day business operations are handled by someone else.
- Caution is advised when using your own company to sponsor your H1B visa.
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USCIS Memos:
- Two USCIS memos (Memo 1 and Memo 2) provide clarification on policies related to H1B workers starting their own companies.
Navigating the intersection of immigration law and entrepreneurship requires a nuanced approach, and seeking professional advice is crucial to avoid pitfalls and ensure compliance with regulations.
