Founders · H1B Visa

Should I make someone a CTO or partner if they need an H1B?

Leena MBA Content & Publication Manager at NetApp

January 25th, 2014

I'm currently vetting a smart backend developer with whom I seem to be having a good working relationship. However, he will need an H1B Visa in order to work in the US full time. I cannot afford to sponsor him at this time. If he gets sponsored by another company, can he work with me on the side on the same Visa? Also, what are the cons of partnering with someone on an H1B? For this reason I have been talking to him in a more "you'll be the CTO" manner rather than "let's partner." Should I just part ways with him now? Please advise, and thanks, family!
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Anonymous

January 25th, 2014

I co-founded a company with someone who we got an H1B for.  It was great, once you get him the H1B it is really no different than any other cofounder relationship.

My thought is, right now you don't have the option of having him as your partner.  There is no difference between CTO and Partner, the essence is that if you work with him you are putting yourself in a position where the success of your company depends on someone who does not have clearance to work here.

He either has to get a job and still want / have time to work with you, has to return home or you have to raise capital so you can sponsor him.

Until one of those 3 things happen, he is not an option.

So I would lay those options out for him, tell him the truth and say I'll let you know if I raise and you let me know if you get the legal stuff worked out.

Then go on with building your company / looking for other people.



Ash Eldritch

January 25th, 2014

An update on Jeff Axup's comments, as the Quora links provided are prior to some recent changes. Essentially:

"As of August 2011, under the current US immigration rules, if you are the cofounder of a funded startup with a board that is empowered to make hiring decisions-that is, the board can fire the founding team-then you are eligible for an H1-B visa sponsored by your startup."

...which equates to non-majority ownership for the H1-B co-founder.

http://www.quora.com/Can-a-H1B-holder-work-for-a-startup-as-a-co-founder

Jeff Axup Sr. Manager, Palo Alto UX Design Research Group at Bosch

January 25th, 2014

I just went through this, and decided eventually that it was too big of a risk as a co-founder (maybe OK for larger startup hiring an employee).
Advice I got from various immigration lawyers (and definitely check out posts on Quora) included:

This would create significant problems for this person to be an active co-founder down the road.

  • H1B selection is random, although there is a master's cap which reduces the pool size to some degree for some applicants. Therefore it is not certain this person would be able to get an H1B and continue to be able to work in the US.
http://www.quora.com/H1B-Visa-1/What-parameters-are-considered-while-applying-a-lottery-system-for-H1B-Visa

  • Hiring a non-US employee is expensive and is a lot of work
You also have to prove that you are a legitimate company to sponsor someone. While you may be legal, you may not have an office yet, etc, which can make it more difficult to prove. Estimates range from 3k-10k total.
http://www.quora.com/Startups/Can-a-startup-realistically-sponsor-an-H1B-or-is-that-just-for-the-big-companies

  • H1Bs are a lottery, they may not receive one.
  • Even if you arrange for the person to pay their own legal fees, you still have to pay the fees to request the H1B for ~$1000. Having the person pay for that indirectly is illegal.
  • Having the applicant own equity in the company might invalidate their claim to apply for an H1B. You're not supposed to own the company that is petitioning for you. That would be a conflict of interest and would essentially allow people to buy an H1B.
  • O1 visas are extremely difficult to get. Almost always not an option.

Basically the US government has made it extremely difficult for foreigners to a) found their own companies and b) join as co-founders for existing companies. This is really un-American since we are supposed to be the country of opportunity and many of our best companies were started by immigrants (e.g. Tesla). Unfortunately foreign cofounders seem to add a lot of legal "gray area" and increase the risk of a startup.

Disclaimer: I am not a lawyer and this is not legal advice.

David Crooke Serial entrepreneur and CTO

January 26th, 2014

Speaking as someone who was co-founder and CTO while H1B status .... 1. There is a cost of around $5k assuming you pay a lawyer to do a new H1B, a 3rd of that to transfer an existing one, and availability is based on (a) paying fair wages[3] (LCA) and (b) a quota of iirc 25,000 net new H1B's per year. Unlike a green card, you do NOT have to prove scarcity of skills. The next batch of quota starts in a couple of months, apply now. The DHS approval[1] (I-797C? been a while) applies to one particular job at one company. Must be W2. Working on the side for free is fine, e.g. developing a business idea and proof of concept, but getting compensated even in options violates H1B status and can get you deported. Bluntly, if you can't afford $5k you clearly can't afford to hire him yourself. 2. I was already here, and originally grew up in a semi-American culture. CTO is not a senior developer role, as with any C level role it requires a whole business perspective, and in my interpretation is the buck stops here role for all things tech, from system architecture to IT to pre-sales. I'd be a little concerned about fit there for someone from another culture being effective interacting with American buyers and vendors first off. 3. It used to be the case that a company had to be in business for 12 months to apply for an LCA, but I've since heard on this forum that rule was rescinded. I transferred my H1B status from an established American company to a "rent-a-desi" contract shop in MD and hired myself from back from them by the hour. 4. There are no restrictions on a non-resident alien[2] owning stock in or being a corporate officer of a US company, at least a Delaware C Corp :) Feel free to ask other questions out of band Cheers Dave [1] approval is from Homeand Security, formerly INS, but the actual visa is a page in your passport issued by the State Department at an embassy in your country of origin [2] H1B is considered non-resident temporary status, max 6 years, but it is "dual-intent" in that you are allowed to apply for residency (green card) while here, and the H1B gets annual extensions meanwhile. For people from India or China it takes a loooong time due to per-country limits. [3] The DHS data is risible, it's years out of date, and doesn't go beyond senior developer, so numbers are low

David Crooke Serial entrepreneur and CTO

January 26th, 2014

A couple of follow-ups:

1. H1B's are most definitely not a lottery, they are processed in order. There are 4 processing centres, the ones closer to Mexico are slow, try to use Vermont if you can (depends on your office not state of incroporation). The quota for 2014-2015 will be used up within days of 4/1 if indeed there isn't already a backlog big enough to consume it.

2. If he's a student he can work here after he graduates for a year on an F1, which has fewer restrictions than H1B.

3. re the pro hono comment, it is of course illegal to work on a J type academic visa.

4. O1 is indeed hard to get (this is the visa people like famous actors get) but there is a loophole if he manages a team for your company in his come country.

5. You haven't stated his home country. For F1 or H1B it doesn't matter much, but assuming it's India it will take years to get a green card. The 1.5 years quoted above is for a European, Canadian or someone who can qualify for EB1a status, I scraped by :=)

Dennis Franczak President and CEO, Fuseideas

January 25th, 2014

Be very careful with how you handle people with H1B visas. They are very restrictive and the sponsoring companies have to pay a lot to get them. If you have a falling out with him after he gets here or he loses his job with the company that's sponsoring him, it could be bad for you because he'll blame you for bringing him over, etc. Plus the company that is sponsoring him will not like it one bit if they bring him over and all of the sudden he has a side job that is taking more time than they want. What happens if you need him full-time and you can't afford the visa?? You will end up being stuck. Think long and hard about this. DENNIS FRANCZAK CEO [cid:image001.png@01CDB1F6.B35F4990] O: 781.897.4801 M: 617.504.4572 EMAIL: dfranczak@fuseideas.com BOSTON / NEW YORK / ATLANTA / PRAGUE / PORTLAND FUSEIDEAS.COM Please consider the environment before printing this email.

Dennis Franczak President and CEO, Fuseideas

January 25th, 2014

Good point Joe..very good point. DENNIS FRANCZAK CEO [cid:image001.png@01CDB1F6.B35F4990] O: 781.897.4801 M: 617.504.4572 EMAIL: dfranczak@fuseideas.com BOSTON / NEW YORK / ATLANTA / PRAGUE / PORTLAND FUSEIDEAS.COM Please consider the environment before printing this email.

Neelesh Vaikhary

January 25th, 2014

The biggest problem is having H1-B as partner is that the company cannot sponsor his green card :) ( you cannot sponsor fro yourself). Apart from that with H1-B , legally you cannot work for other companies as employee/partner. You can be non working director but if you have any foreign national as partner, you cannot have it as S- corp, have to go with LLC or corp then.

Dennis Franczak President and CEO, Fuseideas

January 25th, 2014

Leena, The fact he is here is good. I would definitely talk to an attorney about your situation so you are covered. Best of luck!!! DENNIS FRANCZAK CEO [cid:image001.png@01CDB1F6.B35F4990] O: 781.897.4801 M: 617.504.4572 EMAIL: dfranczak@fuseideas.com BOSTON / NEW YORK / ATLANTA / PRAGUE / PORTLAND FUSEIDEAS.COM Please consider the environment before printing this email.

Anonymous

January 25th, 2014

I paid around $2-3k for it including legal.  It took a couple months to get then about a year and a half to get his green card