H-1B Visas for Entrepreneurs

By Ekaterina Powell, Esq.

We get a lot of inquiries from entrepreneurs who want to come to the U.S. to engage in their businesses whether they can qualify for H-1B visa. Below is a summary of the current USCIS trends and practical tips in making H-1B for entrepreneurs a success.

Proving Valid Employer-Employee Relationship between Entrepreneur and Business

Over two years ago, USCIS has started its initiative to promote start-up businesses and spur job creation. Since then, USCIS has issued a number of updates describing the opportunities for entrepreneurs and explaining how they can qualify for H-1B and other visas to work in their own businesses.

Specifically, USCIS has clarified that entrepreneurs with an ownership stake in their own companies, including sole employees, may be able to obtain an H-1B visa if they can demonstrate that the company has the independent right to control their employment.

In other words, in order to qualify for H-1B in your own company, you have to show that there is an employer-employee relationship between you and your business, as indicated by the fact that the company has the authority to supervise your work, fire, and otherwise treat you as a regular employee of the company.

When USCIS updated its Questions & Answers: USCIS Issues Guidance Memorandum on Establishing the “Employee-Employer Relationship” in H-1B Petitions posted on USCIS website, it gave an example of a sole owner who could qualify for H-1B in his/her own company. USCIS states that the necessary employer-employee relationship can be established if there a separate Board of Directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary’s employment.

USCIS has also recently created a website “Entrepreneur Pathways” dedicated to explaining the U.S. visa options for H-1B entrepreneurs. The website provides further information on the documentary evidence that can be presented to show a valid employer-employee relationship if the H-1B beneficiary has an ownership stake in the petitioning business.

Aside from showing a Board of Directors that controls your work, you can present evidence of preferred shareholders, investors or other factors establishing that the petitioning company has the right to control the terms of your employment.

As evidence of the right to control your work, you may be able to present the following:
• Term Sheet
• Capitalization Table
• Stock purchase Agreement
• Investor rights Agreement
• Voting Agreement
• Organizational documents and operating agreements/bylaws
In addition to the documents listed as examples, you may submit a combination of any other documents that sufficiently establish that there is a valid employer-employee relationship.
In our experience, we have found that it is also useful to present the documents below to show the right to control the beneficiary’s work:

• Employment Agreement between the petitioner and beneficiary or Employment Offer Letter detailing the terms and conditions of employment and explaining how the employer will exercise its right to control the beneficiary, how often the beneficiary will have to report on the progress of work and to whom, how the beneficiary will be supervised throughout H-1B employment, the extent of the employer’s discretion over when and how long the beneficiary will work, the method of payment, the employer’s role in paying and hiring assistants to be utilized by the beneficiary, the provision of employee benefits, and other relevant considerations;
• A description of the performance review process along with progress and performance evaluations;
• Letters from the directors/investors/preferred shareholders explaining how the right to control the work of the beneficiary will be exercised on a day-to-day basis, who will supervise the beneficiary and evaluate the work product of the beneficiary, and explaining the management structure of the company;
• Copy of petitioner’s organizational chart, demonstrating beneficiary’s supervisory chain;
• Other relevant documents.

H-1B for Start-Up Companies

Aside from establishing employer-employee relationship, Entrepreneur in a start-up company needs to keep in mind other important considerations that make it even more challenging to qualify for H-1B, but doable.

Our office has successfully helped many entrepreneurs to apply for H-1B in their start-up companies. With H-1B for a start-up business, similar to L-1A for a new office, USCIS wants to see that the business model is sound and viable.

Below are the specific points to consider in a start-up H-1B:

Bona Fide Job Offer –

One of the very important points looked at by USCIS in a start-up is whether the H-1B beneficiary has a bona fide job offer from the petitioning employer and whether the employer intends to pay the beneficiary the prevailing wage.

Even though there is no “ability to pay” requirement in H-1B and the company does not per se have to prove that it has sufficient funds to cover the prevailing wage of the H-1B employee as in Employment-Based Green Card process, in practice USCIS wants to see that the company’s business is viable and that the employer will not “bench” the employee, leaving the employee without pay.

Thus, it is recommended to include bank statements of the company for the last several months or evidence of a wire transfer showing initial capitalization of the business and ability to cover initial operating expenses.

In addition, the H-1B petitioner needs to explain how it expects the business to take off and include any contracts, documentation on any preliminary negotiations, the projects the company is planning to engage in, etc.

The need for H-1B position and sufficiency of specialty occupation work –

Another point that USCIS considers is whether the petitioner has the need for the position of H-1B beneficiary. USCIS wants to see that there is enough specialty occupation work (that requires at least a bachelor’s degree) available for the H-1B beneficiary and that H-1B beneficiary will not perform other non-specialty occupation tasks.

USCIS is concerned that H-1B employee in a start-up business will not be involved in the actual H-1B-caliber duties but will be doing administrative, sales or clerical work that does not qualify for H-1B.

It is therefore recommended to include explanations as to why the business requires the services of the H-1B employee and include any supporting documentation of what the H-1B employee is expected to be doing, what projects he/she is supposed to work on, collaborated by contracts with customers/partners, etc.

In addition, in start-up H-1Bs our office has included documentation showing who is responsible for the administrative/clerical functions. Even if the company has no other employees on W-2, they may have outside companies that they employ specifically to provide bookkeeping, advertising, or secretarial services. This will serve as additional proof that the H-1B employee will focus only on those duties listed in the H-1B petition and will be relieved from performing administrative functions.

If the documentation is not provided upfront, USCIS usually sends a Request for Evidence (RFE) asking to provide documentation showing that there is sufficient specialty occupation work available for the H-1B beneficiary throughout the H-1B validity period.

Often times, it may make sense for a start-up company to sponsor a part-time H-1B at first as opposed to a full-time position because it may be easier to show the need for a part-time position especially if there are few or no other employees in the business.

Sufficiency of production space to accommodate the work of the beneficiary –

Another point that USCIS often looks at is whether the petitioning business has the facilities to accommodate the work of the beneficiary.

If the entrepreneur is going to work from an office, it is best to include a lease agreement with the floor plan and photographs of the facilities to show sufficient production space. If there is no office yet, USCIS may scrutinize the filing but you may be able to show that the employee will work from home and that the nature of the employee’s work is such that telecommuting is possible.

There may be other important considerations in H-1B petition for a start-up that depend on the specifics of your case and that should be further discussed with an immigration attorney handling your case.

Suggested additional documentation for a start-up H-1B:
• Articles of Incorporation/Organization
• Statements of Information
• Bylaws/Operating Agreement
• EIN proof
• Organization/Incorporation Minutes
• Business Licenses
• Lease for business premises
• Bank statements showing startup funding, wire transfers or tax returns
• Photographs of the facilities to show sufficient production space to accommodate the work of H-1B employee
• Proposed Organizational Chart of the business with the list of positions the company is planning to recruit for and the educational requirements• Business Plans, if any
• Contracts or other proof of projects the business is planning to engage in
• Marketing Plans, brochures and other documentation of the services to be performed/products to be distributed
• Explanations and any supporting documentation as to why the business requires the position of H-1B employee
• Other documents may also be provided to show the viability of the company’s business model and its initial capitalization.

It is recommended to include as much evidence as possible showing the outside control over the beneficiary to prove a valid employment relationship between the petitioning entity and the H-1B worker.

Despite favorable USCIS guidance and the initiatives encouraging entrepreneurs to bolster the U.S. economy and spur job growth, there is still a lot of uncertainty and unpredictability in USCIS adjudications. That is why it is critical for the employers to hire a qualified attorney with experience in Entrepreneurial H-1Bs to help navigate the U.S. immigration system.

If you require help in filing an H-1B petition or in setting up a business in the U.S., feel free to contact our office for a initial consultation.