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Visa Basics for Foreign Entrepreneurs, Part 2: What Constitutes Work?

January 18, 2011 at 10:00 am Comments disabled

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In Visa Basics for Foreign Entrepreneurs Coming to the U.S., I discussed certain immigration statuses (visa waiver, B-1 and H-1B visas) that permit a non-resident alien to take a passive role in a business (such as forming it) but not to work for it. This post discusses the boundary between permissible passive activities and prohibited work.

Let’s assume that the new business is formed as a corporation. Being a shareholder certainly is a passive activity. Being a director (board member) typically should be a passive activity, too, because directors’ role is one of oversight and approval (elect officers, approve major transactions, etc.), rather than running the business.

Being an officer is not permitted, however. Officers are directly responsible for running the business, thus they inherently are actively involved in working for it.

Summary if you are a non-resident alien who must keep his or her activities for a business passive: It’s OK to be a shareholder and a director, but don’t become an officer, employee or independent contractor of the business or do any additional work for it.

Related post: Can I Get an H-1B Visa Working for My Own Company?

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.

  1. Alejandro

    2/8/2011 | 1:07 am Permalink

    Dana,
    I’m planning to make a business (corporation) in usa, I have b1b2 visa, after incorporating and creating bank account, and paying the american taxes I can manage it from my country? Even if I dont get ever a “work” visa I can have profit (and live) from my corporation in my country? I would love to have a work visa, but I wonder if I make the investment of forming a corporation wouldnt be in vain if i dont get a work visa? With the passive roles you describe is posible to have any earnings and live from my corporation? At first I would not have any employees, i would make the work of my company from my country. I have not yet 1 million dollars for a e2 visa, only 20 thousand dlls for initial capital but this is only the start of my plan! Hope you can give a little hope that it is possible. Thanks.

  2. Dana

    2/8/2011 | 10:44 am Permalink

    @Alejandro
    What you want to do is possible: You can form the corporation here and manage it from your home country; no U.S. work visa is required.

  3. haegwan

    5/3/2011 | 4:45 pm Permalink

    Dear Dana,

    Some of my friends, who are non-US citizens, were saying that H1-B Visa holder only can possess 10-15% of founder’s stock. From this post, it seems that they’re wrong then? If there’s any limitation for H1-B visa holders like having 50% of company stock or being a single director, please let me know.

    p.s. I love your blog, which is full of helpful contents! I really appreciate it.

  4. Gigi

    9/18/2011 | 12:37 pm Permalink

    Hello.
    I have a problem similar to @Alejandro.
    I`ve got a business visa and I want to incorporate a LLC or a C-Corp in the US, open a bank account and then leave the US.
    Getting back in my origin country I`ll be hiring US contractors to run sales and marketing operations.
    Can I still name myself CEO of this business, doing “active” US operations outside the US ?

    What could be the consequences if I come in the US several times per year participating in some seminars or conferences as a company representative ?
    Thank you.

  5. Dana

    9/18/2011 | 11:05 pm Permalink

    @Gigi
    There is no problem being a CEO actively working for the company outside the U.S.
    As concerns seminars or conferences, I recommend that you contact a lawyer who specializes in work visas.

  6. Dana

    9/18/2011 | 11:07 pm Permalink

    @haegwan
    I know of no such limitation.

  7. David

    10/25/2011 | 2:31 am Permalink

    Hello Dana,
    First I really appreciate to your article. I have googled for more than 1 day to look for this information. I am really glad to find these valuable information.

    If you don’t mind, I’d like to add my question here.
    I am H1B status. And, I am planning to open either sole owner or LLC (I’m not sure which one suits me the most). Based on what I read from your article, I can form the business, but I can’t legally work for the business.

    Here is my question. If I don’t work for the business and I don’t have any plan to hire someone else, who is going to run it?. (Actually, the business will be run by my wife, H4 status) <- I also learned that H4 also can't do active work.

    What is the possible legal story for my situation?

  8. Dana

    10/25/2011 | 7:39 am Permalink

    @David
    As you noted, if you cannot work for the business, and if you do not hire someone to work (legally) for the business, then there will be no one to run it.

  9. Cofounder

    11/10/2011 | 5:18 pm Permalink

    The bigger question is: IP assignment. How does the foreign F1 student assign his IP to the company (in exchange for tax efficient stock)? If you assign IP, then presumably you developed IP; if you developed IP, the presumably you were “working” at some level. Employment is roughly defined as exchanging labor/time for benefit.

    How do work around this IP assignment issue? More specifically, how do you give the F1 holder stock and in exchange get him to assign his IP to the company? Thanks!

  10. Dana

    11/10/2011 | 10:38 pm Permalink

    @Cofounder
    I think you’re coming at this issue from the wrong direction.

    The fundamental question is the capacity in which the student developed the IP. You appear to be assuming that the IP was developed as part of the student’s active work for the company. If that is the case, then the fundamental problem is that such work is not permitted. But the fact that the work was not permitted does not mean that the IP cannot be assigned.

    On the other hand, if the IP were developed by the student without working for the company – for example, before the company was formed – then assignment to the company should not be a problem at all.

  11. AnotherH1B

    12/17/2011 | 11:49 pm Permalink

    Hello Dana,
    I have a few questions:
    1. I am on H1B. As I know from this bog, I cam partner with other US citizen and start a company. Can I write programs, develop application for the company but not get paid (hope that will amount to not working as I’ll not be paid).
    2. Can I be the majority share holder and be the director but do not pay myself and still controls everything in the firm? While I’ll be working for this new company in my free time (after work hours and over weekends), I’ll be able to get investors for the new company and hire other people?
    3. I want to start a company and work full time for my current employer till I get green card and then turn to my company (or if the company becomes big which I dream of, the the company can hire me).

    thanks.

  12. Dana

    12/18/2011 | 8:00 am Permalink

    @AnotherH1B
    1. Even if one is not paid, work is work, and without a work visa work is not permitted.
    2. Again, whether you are paid is irrelevant: You cannot legally work for the company without a work visa.
    3. I wish you the best.

  13. abhi

    2/28/2012 | 3:10 pm Permalink

    There is no update on EB-6 Startup visa bill yet. Latest I have heard is that if it doesn’t get accepted by June, it will not be sanctioned. What are the odds of it going through. I wish to launch my company in July-August 2012. (most likely as a C corp as S corp is not allowed and LLC is too difficult to convert into S corp later).

    Thank you.

    • Dana

      2/29/2012 | 8:22 pm Permalink

      Abhi, I’m sorry, but I know nothing about the future of the EB-6 bill.

  14. Angelo

    3/13/2012 | 1:21 pm Permalink

    Hi Dana,
    So if I own for example shares in a startup company, am I allowed to receive parts of the revenue as shareholder on a F1 status?

    Thanks

  15. Dana

    3/13/2012 | 1:24 pm Permalink

    @Angelo
    There is no problem owning shares or receiving payment as a result of owning the shares. The problem comes if you work for the company.

  16. Vicky

    4/17/2012 | 10:45 am Permalink

    Hi Dana,

    I have recently graduated with an MBA and currently on F1 OPT. Couple of questions for you
    1) Can I incorporate a LLC – I don’t expect to work for the firm
    2) If I do – can I as the firms director open a bank account and enter into business negotiations.

    Thanks,
    Vicky

    • Dana

      4/17/2012 | 2:53 pm Permalink

      Forming the LLC is fine. Opening a bank account may constitute impermissible work for the LLC; conducting business negotiations almost certainly does.

  17. Imran Amjad

    4/18/2012 | 1:12 am Permalink

    Hello Dana,

    Thank you for useful article. My question is regarding “Selling iPhone Apps on Apple Store”. Can we sell it and get paid OR can we just sell it for free? This question is specific to H-1B visa holder who are employed by other companies but want to develop iPhone apps on the side (for fun, recreation or other purposes).

    Thanks a lot!

    • Dana

      4/23/2012 | 10:49 am Permalink

      You’re getting into a grey area. I recommend that you ask an immigration lawyer who is experienced with work visas – I don’t have the expertise to answer your question.

  18. Mit

    5/20/2012 | 11:01 pm Permalink

    Thanks for the great advice.

    I have a question related to a J1 visa holder (academic researcher) – can I be a co-founder of a C-corporation, own shares and be listed as an officer in the incorporation documentation, but without actually working for the start-up or being paid?

    Thank you.

    • Dana

      5/21/2012 | 5:54 am Permalink

      Quoting from this post on which you have commented:

      “Being an officer is not permitted, however. Officers are directly responsible for running the business, thus they inherently are actively involved in working for it.”

  19. Acherian

    5/28/2012 | 9:08 pm Permalink

    Hi Dana,

    I have been reading about this H1b and incorporating. Everywhere it is said “You can form, but not work for” the business entity and that one should “hire” someone to run the business.

    1. What is the legal hiring pool? Does the new hire have to be resident in US?
    2. Can the new hire be a non resident alien, who can get the tasks done from out of US?

    Every come across this situation?
    Appreciate any hints,
    Thanks
    Cherian

    • Dana

      5/29/2012 | 9:18 am Permalink

      If one can get a corporation’s work done by personnel outside the U.S., there is no work visa problem, because personnel working outside the U.S. don’t need a U.S. work visa.

  20. Acherian

    5/29/2012 | 11:21 pm Permalink

    @Dana

    Thanks, Dana. Have you heard of this change in the USCIS policy which says h1bs can start up and work for the company?

  21. Dan C.

    5/31/2012 | 10:19 am Permalink

    Dana,

    I love your service and we appreciate very much!

    I currently have F1 student Visa and want to establish a INC and open up a business (or purchase one).
    in that case, although i am only the partner of our INC and my partner doing all the work, can i still take the money from that specific income we create?

    • Dana

      5/31/2012 | 1:24 pm Permalink

      A student visa does not preclude one from receiving income from a business investment.

  22. Jorge

    7/26/2012 | 8:43 am Permalink

    Thanks for your post, it is very useful, however I have a question – do you know if you can transfer you H1B visa from your employer to your corporation where you are Director to be able to work also as an officer?

    Thanks and best regards,

    Jorge Lana

  23. wayne

    8/31/2012 | 11:33 am Permalink

    Hi Dana,

    I am a college student on F-1 Visa and making a C-corporation/LLC(haven’t decided yet due to tax issue). My partner will be CEO and I will be President who will only participate in meetings and I will potentially fly to other states with CEO for meetings to meet investors.

    Is is legal to hold President position and fly with CEO to other states for meetings? CEO will be doing all the work and I will only participate in meetings till my graduation. Thank you!

    Regards,

    Wayne

    • Dana

      8/31/2012 | 1:11 pm Permalink

      The President is an officer. Quoting from this post: “Being an officer is not permitted, however. Officers are directly responsible for running the business, thus they inherently are actively involved in working for it.”

  24. zhen Wang

    9/26/2012 | 6:55 pm Permalink

    Hi Dana:

    Great blog.
    I am on H1b, and I am forming a LLC with other 2 partners who are both US-Citizens. one of them will be managing partner as part of the operation agreement required by LLC. I will be the directional person, for example, answer questions by other partners about what strategic area we should be focusing on. Otherwise i am not involved in the daily operation of our retail establishment. I guess my specific question here is what constitues work Vs. permitted role by H1b for purposes of being a partner. Do you have any citing from anywhere that I can read more about what I can or can not do as a partner? lastly, i own 65% of the LLC, is that an issue?

    • Dana

      9/26/2012 | 7:18 pm Permalink

      Ownership is not an issue. I know of no case, or other, authority that established a clear line as to what is permitted and what is not.

      To the extent that activities are more like those of a corporate board of directors (oversight and approval), they should not be a problem. To the extent that activities look more like running the day-to-day business, they will not be permitted.

  25. ddc

    11/5/2012 | 12:47 pm Permalink

    Hi Dana,

    I am on H1B visa and opening a General Partnership co. with 2 other partners who are also on H1b visa. Is this fine or should it be LLC.

    • Dana

      11/5/2012 | 2:01 pm Permalink

      1. General partnerships have the disadvantage of mutual unlimited personal liability. Please see Is there Any Reason to Form a General Partnership?

      2. Your H1-B visas do not permit you to do work for the partnership. They would not permit you to do work for an LLC that you formed, either.

    26. Trackbacks & Pingbacks

  26. The High-touch Legal Services? Blog ? For Startup/Early-stage Companies » Visa Basics for Foreign Entrepreneurs Coming to the U.S.

    […] Related post: Visa Basics for Foreign Entrepreneurs, Part 2: What Constitutes Work? […]

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