The H-1B Visa is given to foreign workers so that they may temporarily work in the U.S. for U.S. employers. However, if an employee works for a U.S. company under the H-1B Visa, what is to stop him or her from opening a company on the side?

Overview of H-1B Requirements

Before we approach the topic of whether employees can start a new business, we must establish what gives a foreign worker the H-1B Visa in the first place. Regulations of the Visa require foreign workers to be employed only into the roles of specialty occupations.  They have to work only for their employer who filed their H-1B visa.

Should a foreign worker quit or be dismissed from the sponsoring employer, the worker has three options:

• Find another job in the same field immediately,
• Apply for a change of status to non-immigrant status
• Leave the United States. These options are non-negotiable.

Scenarios in which H-1B Employees Can Start a New Business

The main rule is that if you are holding an H-1B Visa, you must remain employed by your sponsoring employer. This means that you must become what is known as a “passive shareholder”.  That does not prevent you from creating a new business. It simply means that you cannot work in the company you create.

Although the main rule is straightforward, there are many different and complex situations. Let’s take a look at a couple of examples.

Scenario: Starting a Restaurant Business

If a foreign worker holding an H-1B Visa decides to start a restaurant business, they may do so to a certain extent. The worker can create a LLC to invest in the business and start the business, but he or she may not work for it, even if they are working unpaid. You can hire an employee who can manage all your administrative work for you.

Receiving profits as an H-1B Visa – Holder

As a passive shareholder of a business, foreign workers with an H-1B Visa will be able to share the profits without working for the created company. The foreign workers would essentially be investors in the company they create, and the profits or losses their businesses make would be given to them at the end of the year. There will be no monthly salary.

Newcomers to the U.S. will have a lot of opportunities open to them, including starting a new business. However, one must be sure to pay attention to the rules of the H-1B Visa before they make any big decisions.

Please consult your Immigration Attorney and Tax Consultant before you start or invest in any Business.