Taking Control After an H1B Layoff: Becoming an Entrepreneur

How to Self-Petition for H1B Status

Establishing Company Control

To qualify for a self-sponsored H1B visa, you must prove that an employer-employee relationship exists. This means showing that the company you own has control over your work. You need to demonstrate that you function as an employee, with others having control over your job.

You can submit various documents to prove this relationship, including company bylaws that outline employee responsibilities, evidence of a board of directors, proof of other shareholders controlling your employment terms, restricted stock purchase agreements, and performance reviews conducted by the board. These help show the distinction between ownership and employment control.

Additional helpful documentation includes a list of employees with similar responsibilities, proof of your salary paid by the company, your work schedule, and other documents that show you’re accountable to the company. Also, you’ll need proof that the company has the authority to fire you.

Steps for Launching Your Company on H1B Visa

Starting a business on an H1B visa involves careful planning. Follow these key steps to ensure a smooth transition from being an employee to becoming a business owner while maintaining your H1B status.

1. Plan ahead: If you want to start your own business in the United States, you should begin planning while working for your current H1B employer. An H1B layoff will give you little time to effectively plan and launch your business.
2. Create your company: Choose a business structure (LLC or Corporation, see below), register with state and local offices, get a Federal Employer Identification Number, and acquire permits and licenses.
3. Be a passive shareholder: During the initial stages, you cannot work for the company without proper work authorization. This means you can't get paid, develop products, write code, or manage staff. However, you can do passive work, like market research, meeting investors, and negotiating contracts. You can also act as a passive shareholder or investor.
4. File your H1B petition: When the timing is right, initiate the H1B petition process through your company, ensuring compliance with all necessary criteria. You may be able to start working for your new company based on the filing of the H1B “change of employer” petition, meaning you do not need to wait for the actual approval before starting.

LLCs vs. Corporations for H1B Self-Sponsorship

When starting a business, you might choose between a limited liability company (LLC) or a corporation. Both offer unique benefits. LLCs are flexible in their structure, letting members manage the company directly or appoint managers. This makes LLCs appealing for those wanting more control.

Corporations have a more rigid structure with officers who handle daily operations. Another difference is in taxation. LLCs pass profits and losses directly to members, while corporations face double taxation on profits. Additionally, LLCs often have fewer compliance requirements, making them simpler for small businesses.

Choosing between an LLC and a corporation depends on your needs. LLCs are attractive for their flexibility and simplicity, offering personal liability protection and pass-through taxation. This makes them a good choice for small businesses seeking easy management and adaptability.

Corporations have a clear structure that can help attract investors and issue stock. Despite the double taxation, corporations may offer tax benefits, especially in employee benefits. Your choice should consider your business size and future growth plans to decide which structure best suits your goals.

Why Start a Business on an H1B Visa?

If you're facing a possible H1B layoff, starting your own business can give you control over your career. Instead of working for one employer, you can create your own opportunities. This independence allows you to follow your passions, leading to greater job satisfaction and success.

Being an entrepreneur also means you can create a flexible work environment that suits your lifestyle. You can design your own work schedule and space. Additionally, successful businesses can offer higher financial rewards compared to regular jobs, providing better financial stability when managed well.

O1 Visa Sponsorship

The company you start can also sponsor you for an O1 visa, a type of nonimmigrant visa for those with extraordinary ability in fields like science or business. The O1 visa has no annual cap, making it more accessible, and it also allows for dual intent, meaning you can apply for permanent residency while on this visa.

The O1 visa offers a longer stay, with an initial period of up to three years and the possibility of extensions. It has broader eligibility criteria, making it suitable for accomplished individuals in various fields. This flexibility and accessibility make the O1 visa an attractive option for entrepreneurs with exceptional talents.

EB1A Immigrant Petition

If you choose to start your own business after an H1B layoff, you might later be able to apply for an EB1A visa by yourself. This visa is for people with extraordinary abilities, and it does not require a job offer or employer sponsorship, making it a good option for well-credentialed entrepreneurs.

EB1A processing is often faster than other green card categories. This means you can get your green card sooner, allowing you to settle and continue to grow your business without long waiting times. This is a major advantage for those looking to stay in the country permanently.

Conclusion

Starting a business after an H1B layoff can be a unique and exciting way to build your career in the United States. However, you must ensure someone in your company, like a co-founder or board of directors, has the right to hire and fire you. This setup is necessary for a valid employer-employee relationship.

If you are the major investor and firing you would bankrupt the company, it shows there isn't a true employer-employee relationship. As a sole proprietor, owning and controlling the petitioning company makes it harder to qualify for an H1B visa. Your company must not be created just to obtain a visa, as USCIS scrutinizes applications carefully.

By carefully following the guidelines established by the USCIS, starting your own company after an H1B layoff can provide you with a way to take control over your future in the United States.