Can I form my own company in USA on my visa?
Before we proceed, please note that all of the below information is provided for informational purposes based on my understanding of the rules from the research I have done. It may not apply to your situation and you need to consult a professional before making any decision. I am not a professional and this is not an advice. Errors and omissions expected. This is an opinion only.
All our lives we heard that US is the land of opportunity and what kind of land would it be if it did not give you the opportunity to set up your own business, right?
Yes, US is land of opportunity for its citizens and permanent residents (green card holders), not so much for the other non-immigrant visa classes.
For example, if you are on a student visa, like an F1 visa, you cannot work for a company as it directly contradicts your specific purpose of visit to the US. Even if you set up that company.
Same thing goes true for work visa, like an H1B or L1, you have to be employed only by the employer who sponsored your visa. You cannot work for any other company, even if you form the company.
However, whether you are on student or work visa, you CAN form a company (LLC or C corp, more on that in a minute) but you CANNOT work for your own company without applying for an H1B (work visa) from that company, again this is not easy, especially if you just started out as you will have to show proof of funds that can support an payroll of the employee (in this case You) on H1B.
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Yes, there is an alternative. You can form the company and then employ a citizen or a green card holder. Essentially, you will NOT be doing any actual work except guiding ‘what needs to be done’. Why employ a citizen or green card holder? Simply to avoid the whole visa issue that prompted you to hire somebody else to run your business in the first place. Again, ensure that your recruitment methods don’t get you into ‘discrimination’ issues. Once your company starts making enough profits to afford a full time employee, you can recruit yourself as an ‘employee’ and have Your company sponsor the work visa.
What type of company do I form?
Now that we know you can form a company even on a non-immigrant visa, let’s look at the various forms of companies you can form. I have included information related to non-immigrant visa situation right after the explanation of the type of company. Of the options available, following are the most popular:
Sole proprietorship: this is the easiest form of entity you can form, some cases, you don’t have to form any company, you just report all your income on your personal taxes.
Catch? Your personal assets are exposed in case you get into any settlement troubles.
People on work or student visa can form this company but cannot work for the company and need to have someone else work for the business.Such person working for you cannot be on a visa that prohibits them from accepting employment from you. Your role should be ‘managerial and guiding’ in nature without doing the actual work.
C Corporation: This is the typical corporation which is treated as a ‘separate entity’ limiting the liability of its owners who will be the shareholders. There is a misconception that you need to have lot of people to form a C Corporation but the fact is you can form a C Corporation all by yourself if you can handle the paper work.
Catch? Double taxes: company pays taxes on its profits and you pay taxes on the dividends/income from the company.
People on work or student visa cannot form the C Corporation all by themselves but need to include a person who is citizen or green card holder. Once formed, your role should be ‘passive’ and you can receive the ‘distributions of profits’ but NOT wages.
Limited Liability Company (LLC):By far the most popular form of business. Easy to form, protects the owners from exposing their personal assets, limits the liability of the company and the profits are passed on to the owners who then pay taxes on their personal tax returns.
Again, you can form this company as long as you are not the one ‘working’. You can hire someone else to work on your instructions (who is legally authorized to accept employment).
S Corporation: We will not discuss this as it is reserved for citizens (and maybe green card holders).
Even though we have taken student and work visa as example to explain the rules, these rules pretty much cover the gist of how the non-immigrant visa you are on limits your ability to form a company in US. Some visas, however, may not let you form the company at all (like a Diplomat visit visa).
Bottomline: You can be the boss not the worker on a non-immigrant visa.
I want to form an LLC, which State do I set up my business in?
Good question: Depending on the nature of your business you may have a choice to register in a State other than the one you are currently residing.
For example, if you are running a business that serves the clients from the office premise then it will be necessary for you to form the company in the State you are conducting the business.
If the nature of your business is such that you serve clients beyond a particular geographic location (like a website or a consulting business) then you can choose to form your company in a State/Country other than the one you are residing in. Currently Nevada, Delaware and Wyoming promise many benefits for entrepreneurs to register their businesses in their State. If you form a company in a different State than your resident State/Country, you will need a registered agent. Registered agents act like your ‘contact’ person in the State of incorporation.
You can form the company online with the help of service providers. One of the best service providers on the market now are MyLLC. They have great customer care, competitive prices and one of the lowest registered agent fees (nationwide). Check them out here
Harvard Business Services Inc., also has good reputation in terms of service, pricing and their life-time customer support. Their link is: www.delawareinc.com