Can an H-1B Visa Holder Start an LLC?

People interpret the American dream differently. For many foreigners, it likely represents an opportunity for prosperity and success. Coming to the United States and starting a business is often the start of that prosperity. The United States government allows nonimmigrant alien workers with specialized knowledge to come to America on an H-1B work visa if they’ve been offered a job. But what if the H-1B visa holder wants to start their own company in the United States? Is this allowed? And if so, how is it done? In today’s post, I cover how starting a Limited Liability Company (LLC) could make American entrepreneurship a reality for H-1B visa holders.

What is an H-1B Visa?

The H-1B visa is a nonimmigrant work visa allowing American companies to hire foreign workers with specialized skills to work in the United States. Typically, the job roles require a bachelor’s degree or something comparable. Technology, finance, engineering, and architecture workers typically qualify for H-1B visas.

Because there’s a huge demand for H-1B visas, the government limits the number of visas issued each year. In 2023, the maximum number of visas issued will be 65,000. However, if the foreign worker has a master’s degree from a United States college or university, an extra pool of 20,000 visas is available. If the worker is sponsored by a government research organization, an institution of higher education, or a nonprofit connected to educational institutions, the visa cap does not apply.

The purpose of the H-1B visa is to help employers hire workers with specialized skills by authorizing the temporary employment of these qualified people who are not otherwise permitted to work in the United States. Eligibility for the H-1B visa requires the applicant to have the following:

• A valid job offer from a U.S. employer for a role that requires specialized knowledge
• Proof of a bachelor’s degree or equivalent experience in that field
• The employer must provide evidence that there is a lack of qualified U.S. applicants for the role

Registration for the H-1B visa is done through the U.S. Citizenship and Immigration Services.

How Can an H-1B Visa Holder Start an LLC?

The H-1B visa requirements are pretty restrictive regarding other business activities the visa holder is allowed to participate in. So, for example, if an H-1B visa holder wants to start a business where they run the daily activities and make the major decisions in the company, then likely, their visa would be revoked. However, there are specific business tasks H-1B visa holders can do under the visa’s provisions, such as:

• Develop a business plan and register the business with the state
• Do market research for the company and the products and services it will provide
• Have some voting rights in the business
• Be on the board of directors of the business and attend meetings
• Be a passive investor with no decision-making power

For these reasons, forming a manager-managed LLC would be a good solution for keeping an H-1B visa intact while starting a business in the United States.

Bonus Reading: Single Member LLC vs. Multiple Member LLC

What is an LLC?

Limited Liability Companies (LLCs), like C Corporations, offer business owners personal protection from the activities and debts of the business since the company is considered a separate entity from its owners. However, an LLC is simpler to form and maintain.

LLC owners are called members, and there is some flexibility allowed on how the company can operate, divide profits, and pay taxes. An LLC may be either member-managed or manager-managed. In a member-managed LLC, the owners handle the day-to-day management of the business. In a manager-managed LLC, members appoint one or more managers to run the company.

Most states allow the LLC to either appoint its members to be managers or hire a manager from outside the company. The managers of an LLC frequently have the authority to make most business decisions and run the daily operations of the company, while members retain control over more significant strategic concerns.

The key for an H-1B visa holder who starts an LLC is to stay in the background as much as possible and allow the manager to handle daily operations and make most of the decisions. Also, although LLCs aren’t required to have a board of directors, having one is a way to be a part of the company’s significant decisions without being in charge.

Starting an LLC as a Noncitizen

You do not have to be a U.S. citizen or live here to operate a business in America as long as it is the proper business structure. So, noncitizens can run an LLC if the company has a U.S. address and the LLC appoints a registered agent in all the states where it conducts business. A registered agent, sometimes referred to as a resident agent or an agent for service of process, is a person or company officially recognized by the state that resides within that state and is designated by the LLC to accept service of process (legal documents and other essential documents) on behalf of the company.

So, can a noncitizen operate an LLC and sponsor themselves for an H-1B visa? The answer is yes if specific criteria are met. First, there must be an established employer-employee relationship, even if the employee is actually the owner. Some things that show the employer-employee relationship are:

• Someone else in the company can hire and fire the owner/employee. This can be established in the LLC’s operating agreement, which determines the policies and procedures of the company.
• The company must continue to operate even if it no longer employs the employee.
• The sponsoring company cannot be created only to obtain the H-1B visa. The company must be a legitimate and operational business.
• The job must require the H-1B employee to have specialized skills and a bachelor’s degree or higher.
• The job role must also be open to U.S. citizens.

Stay in Compliance

As long as the H-1B visa holder stays in compliance with the provisions of the visa and with the various deadlines and compliance requirements of the LLC, an H-1B visa holder can have their American Dream come true. We strongly recommend that H-1B holders speak with an immigration attorney before embarking on the entrepreneurial path. And when you’re ready to start your LLC, CorpNet is here to help with all your formation needs.