Please Note: This article was published in 2016 and may not contain current information.
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From Student to Startup to Worker
A common question from foreign students in the U.S. is whether they can be equity owners in a U.S. startup company. Undoubtedly many have aspirations of using the startup not only as a vehicle for financial gain, but also as an avenue to extended immigration status via the popular H-1B visa program.
The short answer is yes, meaning that there is nothing in the law which prohibits a foreign student from investing in and becoming an equity owner in a new U.S. company while he or she is in F-1 or OPT status. It is also possible under the right conditions to use that startup as an avenue to obtain an H-1B visa. However, this strategy must be executed with great care in order to ensure no violations of the student’s status occur.
Initially, foreigners in F-1 student status are generally prohibited from working in the United States. However, they are not prohibited from investing in and laying the organizational and legal groundwork for a new U.S. entity. The student must not begin actually working for that entity while in F-1 status. If and when the student converts to OPT status, he or she may then begin working for their new business, so long as the majority of the work performed directly relates to the major area of study.
With regard to using the startup enterprise to “self-petition” for H-1B status, the foreign entrepreneur must take a number of things into consideration. First, the U.S. Citizenship and Immigration Service does not permit a genuinely self-employed alien to self-petition for H-1B status. However, if an employer-employee relationship can be demonstrated between the petitioning U.S. company and the foreign equity owner, the owner may still qualify for H-1B status.
In examining this facet of an H-1B petition, USCIS will look to a number of common law factors discussed in a 2011 USCIS policy memo. Ultimately, USCIS will want to be assured that the right to control the H-1B beneficiary’s work rests not with the beneficiary, but with the petitioning U.S. employer. Factors such as whether the U.S. employer may hire, pay, fire, supervise or otherwise control the work of the H-1B worker will be relevant. It may prove very difficult to demonstrate the right of control rests with the petitioning company without having other people (besides the H-1B worker) involved in the management or control of the company in some capacity. USCIS has this to say on the point of H-1B workers who own their own companies:
If you own your company you may be able to demonstrate that an employer-employee relationship exists if the control of your work is exercised by others. For example, if your company has a board of directors, preferred shareholders, investors, or other factors that show your organization has the right to control the terms and conditions of your employment (namely the right to hire, fire, pay, supervise or otherwise control the terms and conditions of your employment), then you may be able to meet this requirement.
So, it is possible to demonstrate that a foreign entrepreneur who owns a large, or even a majority, equity stake in a U.S. startup will be subject to the control of the petitioning company, but careful structuring of the company is necessary. Additionally, all the other normal requirements of H-1B status must be met.