Can My Company Sponsor My Own H-1B?

The tough job market makes increasingly difficult for foreign students to secure post graduate employment from companies who are willing to sponsor work visas. Many entrepreneurial minded students ask me how likely their labor certificates are to be approved by Department of Labor (DOL) if they have some “ownership” in the companies that sponsor their work visas. Will they be considered as “investors” or “employees” for the visa purpose?

“Investor” usually includes anyone that has a capital interest in the company. A sole shareholder of a corporation or limited partnership rarely works. A Corporation is a more suitable type of business for that purpose on behalf of employee/owners. For instance, a Board of Directors that has the power to remove executives allows the DOL to be convinced that a position may be available to U.S. workers. There is no magical percentage of ownership that would guarantee a successful labor certification.

There also has to be a bona fide job opportunity. The corporation cannot be set up as a scheme or sham for foreign entrepreneur to procure a labor certification. In addition, the foreign employee/owner’s skills cannot be so integral to the company’s operations that the company would cease to exist but for the employee/owner’s participation. Furthermore, the foreign employee/owner’s degree of control over the business is also a factor. Basically, if his ownership interest and control over the management of the company is too great, it is suspected that a bona fide job offer cannot exist for a U.S. worker. The Labor Certificate will probably fail.

These are the typical questions about the foreign employee/owner that need to be addressed:

1. Is he in the position to control hiring decisions regarding the job for which certification is sought?

2. Does he have an ownership interest in the company?

3. Is he involved in the management of the company?

4. Is he on the Board of Directors of the company?

5. Is he one of a small number of employees?

6. Are his services so indispensable to the employer that the business would likely cease to exist without him?

When to Form a Business

I have been asked by many entrepreneurs about the timing to incorporate their businesses. Some are hesitant to do so at an earlier time for a number of reasons, primarily, the cost associated with the formation, uncertainties about the market prospect and how equity and profit can be split among co-founders, and conflict of interest with existing or former employers. There are many good reasons that a company shall be formed sooner than later. I encourage entrepreneurs to balance the advantages and disadvantages.

Advantages to form a company are:

Ability to contract/Limited liability – Founders may want to establish relationships with third parties in order to plan the business. These third parties could be strategic partners, advisors, employees and etc. Some founders enter into these contracts before the company is formed, this arrangement is not ideal, because any potential liabilities arising from the contract may be founders’ personal liabilities. Once a company is formed, a corporate shield is established, and founders could not be held personally liable in conducting the normal business in most circumstances.

Tax advantage – The earlier the company is formed the sooner stock can be issued and sooner the capital period begins to run. For income tax purposes, when stocks that have been held for more than one year are sold, they will be taxed at a preferential rate than those have been held for less than one year.

Cheap stock issues – If you wait until receiving strong indications from potential investors to form a business, there may be bigger tax liabilities for founders. The difference between what founders pay for their stocks and fair market value of stock at the time of purchase (as determined by reference to what investors are willing to pay) may be characterized as income, possibly resulting in significant tax liabilities to founders.