I have written about opportunities for foreign entrepreneurs who wish to obtain U.S. work visas. (See Visa Basics for Foreign Entrepreneurs Coming to the U.S., Visa Basics for Foreign Entrepreneurs, Part 2: What Constitutes Work?) This post focuses on a particularly interesting aspect of this issue. It asks whether and how a foreign entrepreneur can form a corporation in the U.S. and, then, obtain an H-1B visa to work for that corporation.
Guidance on this issue is provided by one USCIS memorandum (Determining Employer-Employee Relationship for Adjudication of H-1B Petitions, Including Third-Party Site Placements) and two U.S. Supreme Court cases (Nationwide Mut. Ins. Co. v. Darden and Clackamas Gastroenterology Associates, PC v. Wells).
The USCIS memo states that an employee who (a) owns a majority of a corporation and (b) reports only to him/herself may not be able to establish a valid employment relationship (for H-1B purposes). The reason for lack of a valid employment relationship is that the corporation does not control the employee. The memo then states that USCIS uses the criteria discussed in the two cited cases to determine whether a bona fide employment relationship exists.
Nationwide states that the central issue is “the hiring party’s right to control the manner and means by which the product is accomplished”. That case then describes a number of factors to be considered: “the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.”
Clackamas Gastroenterology, in turn, focuses on six issues:
- Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work.
- Whether and, if so, to what extent the organization supervises the individual’s work.
- Whether the individual reports to someone higher in the organization.
- Whether and, if so, to what extent the individual is able to influence the organization.
- Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts.
- Whether the individual shares in the profits, losses, and liabilities of the organization.
So, any foreign entrepreneur wishing to obtain an H-1B visa for his or her own U.S. corporation should strive to ensure that all of the following are in place:
- The individual should own fewer than half of the corporation’s shares.
- The individual and the employer should have a written employment agreement.
- The individual should be paid via the company’s regular payroll processing service, with normal deductions and receiving a W-2 after year-end.
- The individual should report to another person, or to a board of directors, having the right to set the individual’s pay and benefits; set the individual’s work hours; direct and review the individual’s work; and, if required, terminate the individual’s employment.
- The individual should work at the company’s office, using company-owned equipment.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.