Entrepreneurship In America Navigating U.S. Visa Options (2024)

Introduction

Welcome to our comprehensive guide designed to empower aspiring entrepreneurs with the knowledge and resources needed to navigate the intricate landscape of visa options in the United States.

We provide you with the crucial insights and guidance you need whether you are:

• A student currently studying in the U.S.
• A working professional in the U.S. seeking to transition into entrepreneurship, or
• A resident outside the U.S. with dreams of establishing a business on American soil

Each of these scenarios presents unique challenges and opportunities, and our goal is to equip you with the knowledge and resources to navigate this path successfully.

It is crucial to recognize that embarking on an entrepreneurial journey in the U.S. necessitates obtaining proper work authorization from the United States Citizenship and Immigration Services (USCIS). This is achieved through a carefully navigated process of selecting the appropriate visa classification, or a combination of visas, that aligns with your entrepreneurial goals.

This article series will delve into the significance of this work authorization, shed light on the different visa classifications catering to diverse circ*mstances, and emphasize the criticality of early planning. By the end of this series, you will be equipped with essential knowledge to embark on the entrepreneurial endeavors with confidence and compliance.

NOTE:
Nonimmigrant visa options provide foreign entrepreneurs the opportunity to venture into or establish new businesses in the United States. On the other hand, immigrant visas cater to foreign entrepreneurs who have either initiated, or are on the cusp of commencing a new business within the United States, offering them a pathway to Green Card.

Embarking on an entrepreneurial venture in the United States as a foreign national involves navigating a complex landscape of legal and procedural requirements. Here, we’ll walk you through a few critical aspects of the process, tailored to foreign national entrepreneurs like yourself.

1. Crafting A Robust Business Plan

A well-structured business plan is your passport to substantiating the legitimacy of your startup. While specifically mandated for L-1 and E-2 filings, a business plan is a versatile tool that can be employed even when not obligatory. It effectively illustrates that the investment amount aligns with your company’s projected growth trajectory and other financial commitments. Additionally, a meticulously crafted business plan underscores your proactive approach to the business and its requisites for success. Like the commitment reflected in office space and payroll, a comprehensive business plan is indicative of genuine dedication.

2. Establishing A Distinct Corporate Identity

Creating a distinct corporate entity is pivotal in the immigration process. While it’s technically possible to petition for workers as a sole proprietorship, this approach is seldom taken due to pitfalls inherent in this corporate structure. Without a clear corporate identity, USCIS may question the legitimacy of the employer-employee relationship for certain visa categories. If you, as the beneficiary, also own the business, filing as a sole proprietorship is very likely to result in a denial for most petition-based categories. Incorporation can be swiftly and affordably completed in most states, making it a prudent initial step before committing substantial funds to legal and attorney fees required for most nonimmigrant petitions. The choice of corporate structure should align with the business’s nature and its future financial goals. This decision warrants careful consideration, ideally in consultation with a certified public accountant (CPA). In the context of nonimmigrant petitions, factors such as the place of incorporation and whether the company is a “C Corp” or “LLC” hold little significance. However, it’s advisable to steer clear of sole proprietorship and partnerships when you, as the business owner, are also a beneficiary.

3. Procuring Suitable Office Space

USCIS typically requires tangible, suitable premises for a new business. While many startups initially operate from unconventional spaces like home offices or garages, there’s a substantial risk that USCIS may question the legitimacy of the company if it lacks a physical office space. Virtual office setups are generally insufficient, as they don’t establish a consistent location for employees. Additionally, it’s crucial that the chosen office space holds commercial zoning status. If you’re determined to use a home office and plan to have other employees working there, you should thoroughly review any pertinent covenants, conditions, and restrictions (CC&Rs), including zoning regulations, to ensure compliance with activities conducted in a home-based work environment. It’s not uncommon for USCIS to reject petitions if the employer lacks premises that legally permit other employees to carry out their duties.

A. Navigating Start-Up Financials

Embarking on an entrepreneurial venture in the United States as a foreign national is an exciting endeavor, but it comes with a host of financial considerations that are critical to your success. Here, we’ll guide you through key financial aspects, ensuring you’re well-prepared to tackle the challenges ahead.

1. Demonstrating Adequate Capital
   As you launch your start-up, it is crucial to establish that you have sufficient capital to kickstart operations, especially if your business is in its early stages with limited or no sales revenue. This is a key factor for USCIS adjudicators in evaluating the legitimacy of your venture. To give you a guideline, ensure that you have or can reasonably anticipate having enough funds to cover salaries for yourself and any employees, office leases, and additional business expenses for at least a year. If meeting this criterion is challenging, consider postponing your filing until your company starts generating revenue or secures commitments for investment funding.
2. Creative Approaches To Financial Documentation
   Proving your financial resources, particularly for pre-revenue startups, often requires creative strategies. While bank statements and documented wire transfers showing received investor funds serve as compelling evidence, contracts or term sheets from investors can be supplementary proof if you haven’t received all expected investment funding. Signed agreements with potential customers or business partners outlining anticipated sales revenue can also bolster your case. While initial petition submissions do not mandate evidence of financial viability, it can sometimes be strategically advantageous to abstain from including this, as financial records can sometimes raise more questions than they answer. Nevertheless, ensure your attorney thoroughly reviews your investment evidence prior to petition filing.
3. Demonstrating Wage Capabilities
   When your entity has yet to generate its own revenue, it is crucial to address how you’ll demonstrate your capability to meet the offered wage. Viable options include furnishing proof of funding from entities like Incubators/Accelerators, Angel Investors, Venture Capitalists, bank loans, or small business grants. Depending on your business focus, you may also be eligible for grants from government entities. Additionally, securing contracts or written commitments from major clients can serve as strong evidence of a forthcoming income stream.
4. Leveraging Personal Assets
   If you or your family members own homes or businesses in another country, this can serve as valuable proof of your financial capability. These assets may have been used to secure a bank loan. Additionally, founders may leverage the value of their savings or 401(k) retirement account as assets for potential loans.
5. A Comprehensive Business Plan
   A detailed business plan with revenue projections spanning the next 5 to 10 years is strongly recommended. This document not only showcases your financial foresight but also serves as a vital tool in substantiating the legitimacy of your venture.

   With a solid financial strategy in place, you’re well-equipped to embark on your entrepreneurial journey in the United States.

IMPORTANT
We wish to remind our readers that any unauthorized efforts to earn income or engage in profit-generating ventures without the proper work authorization could lead to serious and lasting consequences. Engaging in unauthorized work can lead to severe penalties, including the possibility of being charged with immigration fraud in the most extreme circ*mstances. Unauthorized employment can result in the denial of future visa applications, the revocation of your current visa, and even a permanent ban on re-entry to the United States. Such violations not only jeopardize your current immigration status but also create significant legal challenges that can affect your ability to live and work in the U.S. in the future. It’s crucial to fully understand and comply with the restrictions associated with your visa to avoid these potentially devastating outcomes.

B. Mastering Financial Strategies During Entrepreneurial Journey

As you embark on your entrepreneurial venture in the United States, understanding how you finance or plan to finance your business is pivotal for receiving accurate immigration advice. What may work well for H-1Bs could have serious implications in the context of an L-1, E-2, or IEP. Often, decisions about financing are made without considering immigration consequences. It’s good practice to consult an immigration lawyer before taking on additional financing. Below, we will discuss various financing methods and the common issues associated with them.

1. Equity Investment (Ownership Shares)
   When you opt for an equity investment, you exchange money or other resources for ownership shares in your company. Through this approach, you essentially share a part of your ownership in exchange for funds to grow your business. In regions like Silicon Valley, venture capital firms are commonly sought-after sources for equity funding. The first major round of equity financing is often referred to as the “Series A Round.”

   Equity financing can have both positive and negative implications in the immigration context. Let’s start with the positive aspect: in certain petition-based contexts like H-1Bs or O-1s, you may want to show that you, as the founder-beneficiary, own less than 50 percent of the company to establish the required employer-employee relationship before filing for an H-1B or similar nonimmigrant visa. The initial round of equity financing could help you achieve this. For instance, if you graduated from The Booth School of Business at the University of Chicago and founded a startup as the sole shareholder, you might face challenges changing your status to H-1B due to sole ownership. Fortunately, if a U.S. Venture Firm is impressed by your idea and invests $100 million in your startup, gaining 55% ownership, you can now demonstrate the necessary employer-employee relationship because you no longer have sole control.

   However, there’s a potential downside: equity financing could jeopardize a startup company’s eligibility for L-1 and/or E-2 visas. For example, let’s say you’re a Spanish citizen. Your startup is 100% owned by a Spanish company you established. You are the CEO and you are in the U.S. in E-2 status. Your Vice President, a South African citizen, was transferred to the U.S. in L-1 status after having worked in your Spanish company for 1 year. You’ve raised $150 Million from a U.S. Venture firm- they want a 55% controlling interest in the startup. Once the deal is finalized, however, you as the CEO no longer qualify for the E-2 as the company is no longer majority owned by Spanish citizens. Your Vice President also will lose his L-1 status because the qualifying parent-subsidiary relationship between the Spanish company and U.S. company will be severed. After landing the deal of a lifetime, you find out from your immigration attorney that you and your VP may need to leave the country immediately once the deal is finalized. You won’t be able to return possibly up to 18-24 months after leaving if you can get picked in the next H-1B lottery or if the U.S. company files a green card petition on your behalf. Even if the U.S. Venture firm agrees to invest in the Spanish parent company, taking majority ownership, the VP’s L-1 status will be salvaged but your E-2 status still cannot be saved. You may be able to convert to L-1 status in this scenario but only if you can show you were employed by the Spanish company for at least 1 year before coming to the U.S.

2. Loan (Financial Support)
   Now, let’s turn our attention to loans. On the surface, they might seem straightforward. Imagine a scenario where a bank lends your Enterprise $1 million to kickstart a business, with an agreement to pay it back over 5 years. If you’re considering an E-2 visa, you’ll need to understand how the loan is secured. If the loan is backed by the business’s assets, it will not qualify as ‘investment.’ On the other hand, if the loan is secured by alternative collateral, it might count as an investment for E-2 purposes, provided the necessary possession and control can be demonstrated. Keep in mind that the bank being a U.S. bank should not be an issue; E-2 visas don’t require the funds to come from outside the U.S. However, consular officers have significant discretion, and based on our experience, they don’t always interpret the Foreign Affairs Manual in a rigid manner. Some consular officers may not view a loan from a U.S. bank as a foreign investment, potentially making the E-2 application even more challenging.

   Additionally, it is crucial to ensure that a loan is indeed just a loan, without any additional agreements that could lead to a change in ownership. In the case of tech startups, what a client might refer to as a loan could actually be a convertible note, which can create complications later on. While loans from the beneficiary-owner to the enterprise are generally fine for E-2s, they can be problematic for H-1Bs and other nonimmigrant visa classifications. Such a loan might lead to the conclusion that there’s no separation between the beneficiary and the employer, thereby invalidating the employer-employee relationship.

3. Convertible Notes
   A convertible note is a financing tool that starts off as a loan (referred to as a “note”), and under certain circ*mstances, can convert into an equity investment at a later stage. This type of financing typically occurs before equity financing and is common with “angel investors” who make early investments in startups. If the startup successfully secures equity financing later on, the initial angel investor usually has the option to convert the note into equity, effectively becoming an owner.

   While convertible notes are effective for raising capital, they can pose challenges if the conversion event is not anticipated. Since ownership undergoes a change during this event, it could jeopardize the company’s eligibility for E-2 or L-1. Therefore, it is crucial to clearly ascertain the terms of any convertible note financing, understand what triggers the conversion event, and when it’s likely to occur.

C. Navigating F-1 Visa Regulations For Student Entrepreneurs

Entrepreneurs often arrive in the U.S. on F-1 student visas, and upon completing their studies, express a desire to stay in the country to initiate a new business venture. It is worth noting that there is no prohibition against a student in F-1 status from launching a business in the U.S. as long as they don’t engage in unauthorized work. The F-1 visa regulations provide clear guidelines on how F-1 visa holders can engage in employment through Curricular Practical Training (CPT) or Optional Practical Training (OPT).

While a student could potentially undertake all activities related to starting a business, they would be unable to run or manage that business, except in limited cases where approval is granted by the school for CPT or OPT. Given that CPT employment opportunities are typically narrow in scope and necessitate approval from the designated school official, it is unlikely that a student involved in a start-up, particularly one with ownership interests, would receive CPT approval. On the contrary, OPT explicitly allows for self-employment. However, it is crucial to recognize that both CPT and OPT options not only have limited scope but also severely restricted duration. The maximum period one can stay in the U.S. after graduation on OPT is 36 months, and this is contingent on eligibility for the Science Technology Engineering and Mathematics (STEM) extension. Any portion of full-time CPT or OPT utilized before completing studies may also deduct from the post-completion timeframe.

Another consideration when starting a business while maintaining F-1 visa status is the issue of immigrant intent. Establishing a permanent venture in the U.S. may raise questions about the student’s intention to continue adhering to visa requirements. Therefore, the student entrepreneur may be able to launch a new company while still in school and stay for a limited period after to further develop the business. However, eventually, they will need to explore alternative avenues to stay in the U.S., which may involve a change of status to another nonimmigrant visa category allowing for employment. The H-1B visa, O-1 visa, E-2 visa are such options that we will be covering in the upcoming articles.

Conclusion

Embarking on the U.S. entrepreneurial journey as a foreign-born founder is full of promise and potential. Whether you’re abroad, or in the U.S. as a student or worker, we’re here to help you kickstart your American venture.

We’re not just about facilitating startups; we’re about empowering dreams. Our dedicated team guides you from ideation to launch, and from navigating the complexities of visa procedures to strategizing investments. We handle all your immigration needs, letting you focus on growing your business.

The success stories of foreign-born entrepreneurs inspire us. Let’s turn your vision into reality. Take the first step. Schedule A FREE Assessment with our seasoned Immigration Lawyers today, and let’s build something extraordinary!