Incorporation · Immigration

Founding a startup while on H1B visa of another company. Good or Bad ?

Himanshu Bhaisare Teach me how to startup.

October 12th, 2015

I am an immigrant founder with 2 co-founders who are also immigrants. We have a client who is using our beta and providing feedback and will start using it when it is completely ready. Our products are

1. an online scheduler for massage therapists
2. and an app for end users to book appointments with their therapists

We made a very important connection through networking and this person may open additional opportunities/ clients for our business. She has accepted to take advisor role in exchange of equity percentage. Until now, we didn't feel the need to form a legal entity for our company but now I compelled to incorporate my startup so that I can legally distribute equity to my advisor. Now I have two questions

1. Am I going to get in legal trouble if I incorporate my startup while I am on H1B visa of current employer ? If yes, are there any workaround ?

2. How much percentage of equity should be given to the advisor ? Her responsibilities include providing feedback on our product (since she is therapist herself) and connect us to possible opportunities/clients (because she is very well connected)

The most important question is question number 1.

Ramesh Babu Analytics Champion | Data Evangelist | Sales Leader

October 13th, 2015

Try and apply to Unshackled (http://unshackled.co/).  They seem to be solving this kind of dilemma.  

Shobhit Verma

October 12th, 2015

Brother it is a long and hard road ahead.
There is a red flag that I want to address but first to answer your question-
You can incorporate but cannot work for the company at all (even for free).
You cannot get paid from that incorporated company in any form (even if it is house rent).
Some people choose to incorporate in Hong Kong /India and find RELIABLE partners in India and US to run the business. If you are writing code .. outsource to developers in India or let a team in India do it. (It is hard to keep track of whether you wrote any code for it or not, so you would need to come up with a system to document such activities.)
If you need to give up equity, give equity either in the HK/Indian company or create a separate company in US which own's majority equity stake in the HK/Indian company. Then you can issue equity in the US company(which is only a stake holder, doesn't actually do business).

Now the big red flag....
The advisor is worth nothing.
I learnt it a little bit hard way and I don't want to go on and on with examples and anecdotes so I will keep it simple.
Good advisors
1) Help out for free. Do not ask for money or equity
2) Look at the product, give feedback as well as do other introductions if they are excited about the product.
3) Invest !! They get equity only if they invest. You can generally defer the valuation discussion by using convertible notes or SAFE (check out YC) with some discount (at least 20%)

Trust me, right now you are excited to get some attention from this advisor but unless she invests, her excitement will subside way before yours does and you will be left frustrated. If she doesn't invest, she doesn't believe in either the idea or the team. She will perform way below your expectation. 
Move on and find some other advisor who is willing to invest.
If you cannot find even a single industry expert who is willing to invest, thats sufficient validation for you that your idea or team sucks. Pivot to the next idea you are excited about!
Sorry for not sugar coating in interest of brevity

Vikas Taneja Enthusiast and experienced software professional

October 14th, 2015

I'm also interested in knowing the possibilities. I had an idea I wanted to work on and had done my research on its potential. But due to h1b visa restrictions, I couldn't proceed. I've tried to pursue what Ankita mentioned but the guys I approached (who had green cards) were reluctant to proceed to even find legal ways. Please share when you find out something. I'll also share my experience on the link which Ankita shared. Best, Vikas

Shobhit Verma

October 13th, 2015

@Himanshu I am talking about actual money, not sweat. 
In my opinion, upfront monetary commitment is the biggest commitment in the world. Often, people love ideas and give positive feedbacks until they are asked to invest some money. Money makes everything serious.


Check these out--
http://calacanis.com/2015/01/26/should-you-give-advisors-equity-in-your-startup/
https://www.quora.com/Is-it-typical-for-advisors-to-be-asked-to-invest-in-a-startup-as-a-pre-condition-of-being-an-advisor

Himanshu Bhaisare Teach me how to startup.

October 13th, 2015

@Shobhit what do you mean by invest ? Do you mean she should put money in my startup or the time she spends evaluating our product, the time she spends connecting me to other possible clients counts as investment as well ?

Ankita Tyagi

October 14th, 2015

Thanks Vikas. Yes, if nothing else, please drop your stories on Fwd.us because incorporating company on H1b is just ridiculous. Let's do something about it. Instead of waiting on the sidelines.

Anonymous

October 13th, 2015

Himanshu / Ankita,
Ankita's suggestion is workable. You must tie up with a GC and also take Shobhit's suggestion. if you people have good ideas, connect with me, a GC, and we can see how to work it out. 


Ankita Tyagi

October 12th, 2015

Himanshu, 
I am in a similar boat. Legally - you cant. Illegally- I am sure there is something, I just don't know. One way is to partner with someone with a Green Card, strike a stock option deal, where I believe at some point of time in the future, if and when the company is in a solid standing and has the ability to hire you - you can leave your current work, go to the company on H1b or ideally on GC. Again, not a legal expert but have googled my brains out on this topic and that's what I've learnt. If you find out otherwise, please do let me know.
Also, I've submitted my story (as have many other foreign born entrepreneurs) on fwd.us : http://www.fwd.us/
They are pushing for an Entrepreneur Pathways program - to solve this very problem. So drop your story...the more momentum we get, may be the White House will do something about it. In the meantime, see if you can get a GC or partner with someone who has a GC and figure out transferable stock options via a legal expert. Good luck and let me know if you find another solution - because I definitely want to explore another option on this.

Suresh Appukuttan Principal at Nangil Inc

October 14th, 2015

Himanshu, I may have a solution to tackle your situation. Please email me @ suresh@nangil.com.

Anonymous

October 12th, 2015

Well there is your current employer that might claim you are developing something in his time, might sue you and want ownership of your new company. I think the chance in that is small, just manage your relationship with your current employer well (BTW Silicon Valley the series has an episode about this, watch it:))

You can incorporate now, that is not the problem. You cannot pay yourself any salary, wages or on a 1099 (contractor fees). For that you need a different visa that allows you to work for the new company. The trouble with your visa is that you are never going to get an H1B as a cofounder. USCIS will just not accept that, they will claim you started the company to hire yourself. So you need to find a different way to obtain a visa. There is the investor visa, this requires an investment from minimum $100k from your country of origin. It doesn't need to be your money, but you still need to find somebody from your country. Or the L1, the inter company visa. This allows you to transfer from a foreign company to its US based sister company.

Sorry, immigration is not easy in the USA