According to a publication by The Business Times, an H1B visa is a non-immigrant visa that allows companies in the US to temporarily employ the services of workers in special fields. These workers need the knowledge of a special field and a bachelor’s degree or a work equivalent experience in areas like engineering, architecture, IT, accounting, medicine, science, mathematics, and so on. The question however is: Can H1B visa holders invest in a startup?
H1B visa holders can invest in a startup in the US but there are a lot of processes to go through and you also have to be careful so that some of your actions do not fall under unauthorized work that could compromise your status. You are allowed to engage in passive investing on an H1B visa.
Before investing, you should hire an attorney or a lawyer who will check your business activities and crosscheck with your immigration advisor or attorney to make sure your dealings don’t affect your visa status. In the rest of this article, we will provide you with useful information about investing with an H1B visa. Let’s begin!
Can H1B Visa Holders Angel Invest in Startups?
Angel investment over the recent years, has gained a widespread around the US. Angel investors otherwise known as private investors are people with a high net worth and who provide financial support or backup for small startups usually in return for ownership equity in the startups. The financial backing provided by these Angel investors is usually one-time investments that help the startup get off the ground while carrying the company through the difficult early stage.
It is possible to be an angel investor with your H1-B visa so long as you’re not materially associated with the company but draw passive income from your investments only. However, to become an angel investor, there are certain income restrictions you must comply with.
According to US News, only accredited investors with more than $200,000 in annual income in the past two years; with a spouse of more than $300,000 in the last two years; or $1 million in the invested asset, were previously eligible to be an angel investor
However, in 2017, these restrictions were reduced to permit both accredited and non-accredited persons whose income is below the earlier started limit to invest in startups via crowdfunding platforms as stated in Title 3 of the JOBS acts. A non-accredited investor with an annual income of less than $100,000 can invest in excess of $2000 or 5% of their income annually. However, investors who have more than the suggested $100,000 can invest 10% of their income annually.
Can H1B Visa Holders Start Their Own Company in USA?
The H1B visa is in high demand due to its uniqueness, flexibility, and multipurpose intent. However, the USCIS has placed a strict set of rules and guidelines regarding the nature of an applicant’s application for the visa. It is a known fact that anyone who wishes to apply for the US H1B visa needs a job offer from a US company or employer in order to apply. But is it possible for H1B visa holders to start their own startups or businesses? Well, yes it is possible. The process is hard and subject to high screening, it is, however, still possible. And here’s how;
The process involved is almost the same as that for a U.S. citizen. The only difference is that you must compulsorily set up an entity that would have control over the duties and salary of the company.
Below are the steps:
- Research and come up with a strong business plan that shows that your business will thrive.
- Research about the various business systems like LLC, corporation, or sole ownership.
- Develop and register your business name with both county office and state government.
- Ask the IRS for your tax identification number (TIN) and Employer identification number (EIN). The EIN will be the social security number for your business. Get your EIN from the IRS website here.
- Rent a location for the business.
- Be sure to have all permits, documents & certificates to enable you to operate legally.
- Research every aspect of your business to avoid future legal problems because all states in the U.S. have different requirements about benefits, health insurance, state tresses, and worker’s compensation.
Legal Rules and Regulations to Consider Before Starting a Business or Startup in USA as H1B Visa Holder
If you intend to quit your job and start a business, you should reconsider that idea by understanding the following regulations:
- You can’t quit your job from your H1-B sponsor: For your visa to remain valid, you have to remain employed with your sponsor. The H1-B visa allows you to live while also working in the US so long you are actively employed by your original sponsor or a new one, in the case of a transfer. If you’re looking to start your own business, you must remain and work for your H1-B sponsor so your visa status is intact.
- When starting your business, start as an investor shareholder or a passive shareholder: In a real sense, nothing actually prevents you from starting your business in any form as an investor, even if you’re going to be the sole investor. It is similar to buying stock in a US company that you would not be part of the operational activities but can have normal shareholder participation like attending meetings and voting.
- You must hire someone to run the startup for you: In a very simple term, you cannot work actively in your own business while in the US with an H1-B visa. Then, because you can’t work within your own company, you must hire someone to handle the company administrative and daily operational activities. While you will still be working for your H1-B sponsor, this is even more necessary as you would not be able to do both effectively because of the time.
- Oversee the business as a shareholder: As stated earlier, you cannot actively work in your business, you can, however, oversee the business without directly participating in it. You’re also entitled to the ownership right of the company or business income, gain, or dividends in business value.
Can H1B Visa Holder Start a Company Abroad (Home Country or Offshore) While Working in the USA?
The federal law of immigration allows immigrants to work for one employer when in the US with an approved H1-B visa. This H1-B process is one where USCIS allows persons from foreign countries to work in the US with their professional set of skills. The main rule is that any work outside the employment of the H1-B immigrant is forbidden.
However, in a case where an immigrant in the U.S wishes to start up a business or company in either his home country or another, it’s is absolutely possible. You can own your own company in another country while you are working in the US with an H1-B visa. While noting that you are a temporary resident in the US for the purpose of Income-tax filling, if you meet the adequate presence test, you are obligated by law to pay income tax in the US for your income across all countries.
You will have to submit financial report documents to the US income tax return with details of all your financial transactions where your business is based. However, depending on the tax agreement between the country where your company is and the US, you might get an exemption in the US for the portion of tax you have already paid to the host country. There might also be other exemptions where you own the company but you will pay the tax in the US even despite the exemption that you were not meant to pay text in the host country.
You might get a pass in the country where you own the business; nevertheless, you will pay the tax in the country of your H1-B despite the exemptions that you were not entitled to tax to that country. In the end, as your income increases, you will pay more tax to the US as you might fall under a high-income bracket as your business profits.
Legal Rules and Regulations to Consider Before Starting a Company Abroad While Working in the USA on H1B Visa
When considering starting a business outside the U.S While in the U.S on an H1-B visa, some of the regulations to take note of are listed below:
- Contact your immigration attorney before you begin any step to give you a detailed explanation of all that comes with the process.
- Study extensively, the tax laws of the US, and that of the country you wish to start your business. If possible, contact your attorney for this too.
- Obtain a permit from the US immigration board and also the Department of Labor.
In conclusion, it is to be noted that the maximum number of years that can be spent in the US on an H1-B visa is 10 years for exceptional Department of Defense-related work.
If a person’s employment ends for some reason, the person shall compulsorily leave the US unless if they apply for a grant and finds another employer suitable to their status within the next 60days.