Can an H-1B Holder Start or Own a US-based Business?
The ability for an individual on an H-1B to own or start a business first depends on the structure of the entity. There is one particular corporate structure that as a general rule does not allow foreign ownership: S-Corp. This kind of corporation cannot have shareholders that are not U.S. citizens. If the corporation is a C-Corp or LLC, H-1B holders can typically own a small percentage of the business.
The typical path that H-1B holders take when starting a business in the US is to become a passive shareholder in the new entity (similar to holding stock in a public company) while remaining employed at the company that the H1B is associated with. The H1B holder will have to hire someone to actively run the new business, since s/he cannot. The H1B holder remains entitled to the ownership rights associated with owning a portion of the business, but cannot take an active role in the company.
But, it is important to mention that as an H-1B holder you won’t be able to run the business as CEO. Because H-1B visas are granted mainly to individuals who have special skills and knowledge, the rights and obligations of H-1B workers are strictly linked to the services that they are performing for their sponsors. In other words, you can only work for the company that sponsored your H-1B and under the terms that were included in your application form (Form I-129).
If you would like to act as CEO of your company you could seek advice regarding how to change your visa status, for example to an E2 category, or how to transfer your H-1B to a new employer. This is a different, complex process, that we will address in a separate post.
The U.S. Citizenship and Immigration Service has also provided a helpful guide to the various types of visas available, and their varying rights and obligations.
Entrepreneurs have devised a variety of ways to get around these laws, none of which we endorse. A common path forward for entrepreneurs is to find a co-founder who is a U.S. citizen, or here on a Green Card and thus has no limits on his or her citizenship. The H-1B holder can remain with his/her current employer, hoping the new venture gains traction in the meantime. If the startup reaches the point where it can sponsor an H-1B, they can apply for one. Importantly though, it will have to demonstrate that an employer-employee relationship exists, which can be a complex issue if the individual is a co-founder of the business.
One last comment: New government initiatives may be changing the current immigration policy (politics is unpredictable, so we can’t offer much insight into what may happen, unfortunately). This means that in the short term we may see significant changes in immigration regulation, which in turn could affect the rights and obligations of H-1B holders.
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