Visa Holder? Consider This Before Pursuing A New Business Idea
One of the most common questions I get as an immigration lawyer in Silicon Valley, having helped many immigrant entrepreneurs over the last decade, is whether visa holders can pursue a business idea that was not the focus of their current underlying visa status.
Now you might expect the U.S. immigration rules to provide a definitive answer to this seemingly simple question of what constitutes employment and therefore requires specific employment authorization, but you would be sorely mistaken. It would certainly help to have such clarity, both as a means to help visa holders stay within the law but also to help promote economic development and innovation. Instead, this topic falls into rather murky territory quickly.
Wading Into Murky Waters
Imagine I’m in the United States as a foreign graduate student (well over 50% of graduate students in the U.S. are international students), holding an F-1 student visa, when during a class project, I happen upon a tremendous tech idea. Before I’m even through picking the background color for my pitch deck, an investor overhears me discussing the idea with a co-founder at the local coworking space and immediately pulls out her checkbook. This is great! Let’s do this! I can do this as a student, right? Right? Please?
Specific visa types in the United States typically have narrowly defined allowable activities and requirements in place for the foreign national visa holder to abide by to prove they are validly maintaining their immigration status. This is critically important, as failing to maintain status can lead to tremendous difficulties in future attempts to change visa status and could make one removable from the country.
While understanding what it takes to maintain one’s visa status is rather clear, what is hazy is what activities one may engage in beyond those authorized and required by any given visa category. For example, as a student enrolled in a full course of study, am I allowed to spend some time developing and researching the market for a startup idea? Can I set up and own a legal business entity in the United States? May I seek and raise funding for my business? Am I allowed to hire workers in the United States? Could I invest my own money into a business? May I take profits from the business? These are issues that aren’t hurdles for U.S. citizen founders but can be major obstacles for foreign founders.
Further, the current laws do not help clarify the issue, and there is very little case law to go on. So instead, we are left with guideposts:
Payment Is Not Determinative
As a visa holder subject to U.S. immigration laws, it is often a mistake to believe that if you are not getting paid money for your time, then you are not an “employee” or “worker” engaging in unauthorized work.
U.S. Citizenship and Immigration Services (USCIS) defines an employee to be “a person who provides services or labor for an employer for wages or other remuneration.” In other words, you could be paid or remunerated for services if you are receiving benefits of any kind, such as housing, clothing, food, gifts, equity, future profits and so on.
It is also a big mistake to believe that self-employment does not require employment authorization. It does. This much is clear.
Defining Specific Activities Is Crucial
The actual duties that you are engaging in on any project are of critical importance. Is the time spent on a business passive, or is it work that an individual in the labor market could typically be paid to complete?
As provided in one opinion, some important factors to consider include “number of hours spent by the applicant at the business, the tasks performed by him, and number of employees engaged at the enterprise and the hours and tasks performed by them.”
One of the few cases on point turned on whether activities were more like those of a business manager and management of one’s investments or whether activities conducted by the visa holder were reducing the number of jobs available to U.S. citizens or work-authorized immigrants.
Further, where activities carried out are not merely incidental to the underlying purpose of one’s visa status (whether to study on an F-1 visa or work on an H-1B visa with an employer) but instead begin to take more and more dedicated time, the more issues are likely to arise.
Volunteering Is Normally Not The Answer
Pursuant to the Fair Labor Standards Act, employees may not volunteer services to for-profit private sector employers. Even in situations where you are volunteering for a nonprofit organization, you cannot be doing work that displaces a genuine employee. Therefore, volunteering is generally a poor hook to hang your hat on.
Investing In A Business Can Be Okay
Acting as a passive partner or investor in a business, having others there to execute on the daily vision, is likely a safe bet while you consider an L-1, E-2, O-1, H-1B or other entrepreneurial solution.
You are permitted to invest in the United States without specific USCIS work authorization. Investment options run the gamut and can include stocks, properties, equity and so on. However, the idea of such investments is that you remain a passive party, at most managing your investments. Delivering any labor or services to the business is likely problematic. Acting as an officer of the company may also be problematic, as this insinuates directing and developing operations.
The reality is that pursuing a business idea as a foreign national in the United States is more challenging than it is for U.S. citizens. Use these guideposts to recognize when you may need legal counsel — and remember, it is possible; after all, almost half of Fortune 500 companies have been founded by first- or second-generation immigrants.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation. Legal standards and rules often change. www.immipartner.com
Originally published in Forbes on August 22, 2019.