I am on H1b completing 3 years and getting started with my GC. My friend is currently doing all the prod dev work from India. So far, I haven't participated in any work myself, apart from ideation, some requirements and registering a domain. Once my friend has a prototype, I would like to launch it (with out incorporation) and start generating some traction. That would require me to do marketing and selling to customers and investors. I am ready to jump ship if I find some investors ready to invest. However, that might take at least a year. Questions
1) Would investors even encourage someone who is going through visa issues? Would they provide support in case they do? There are VCs like Unshackled that handle all your visa problems. Are they worth it?
2) What are some suggestions to take this side project to incorporation without getting myself into legal issues?
Unfortunately no one can give you the legal advice you seek who isn't an attorney. No one has to incorporate (you can be a sole proprietor), but to sell products and services you would need to register your business with your state and have any requisite permits or tax accounts.
I don't know anything about how you can pay business taxes as a sole proprietor if you are not a citizen, or the implications of earning an income if you incorporate and are one of the business owners.
Here's my suggestion on investment. Consider that it's probably 90% likely you won't get a dime from any investor ever who is not a personal friend or family member. What would you change about your business to ensure it didn't need outside investment? How would you make money right away so you could sustain your business without outside money? If you can run your business without investment, do it. Grow it rather than try to do it all at once.
As for your legal status, that's going to require a real conversation with a real attorney who knows that area. Such advice that you can rely on may not be available for free. And if you take the advice of someone who isn't an attorney, you're taking a significant risk.