Dear Sophie: Can an H-1B co-founder own a Delaware C Corp?

NelsonG · November 18, 2020

Sophie Alcorn Contributor

Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.

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Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.

“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”

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Dear Sophie:

My VC partner and I are working with 50/50 co-founders on their startup — let’s call it NewCo. We’re exploring pre-seed terms. One founder is on a green card and already works there. The other founder is from India and is working on an H-1B at a large tech company. Can the H-1B co-founder lead this company? What’s the timing to get everything squared away? If we make the investment we want them to hit the ground running.

—Diligent in Daly City

Hello, Diligent!

Thanks for your questions. It’s always very exciting for me to hear about new companies launching and this has been the year for creativity as necessity is the mother of invention. The easiest path is for the founder with a green card to be president and CEO, and for the H-1B co-founder to be an employee working in a specialized technical role to qualify for an H-1B transfer from the current employer to the new startup. However, there are a few potential immigration issues to be aware of. Check out my recent podcast about due diligence in immigrant-founded startups.

The good news is that we can get the H-1B founder’s work transferred to NewCo, even though it’s a small, pre-revenue company. Presumably NewCo has a strong business plan. If you can make the investment so the company has the ability to pay the H-1B prevailing wage, we can usually effectuate the H-1B transfer for the founder in about 2-3 months.

It’s important to be aware of the proposed equity split between the founders. Simplest is if the founder on H-1B will own less than 50% of the company. If this individual must own the majority, some structural work can be done with a corporate attorney to set things up to qualify for an H-1B, but it’s more complicated.

This is because to qualify for an H-1B — whether it’s a transfer, initial petition or extension — the sponsoring employer must demonstrate that an employer-employee relationship exists between the company and the H-1B beneficiary. That means the employer must have the ability to hire, supervise and fire the H-1B beneficiary, and the H-1B beneficiary cannot own a controlling stake in the sponsoring company. For additional context, check out my podcast on H-1B Transfers for Startup Founders.

The co-founder who has the green card would probably need to be designated as the person who will have the authority to hire, supervise and fire the co-founder on the H-1B visa on the immigration forms. As always, I recommend working with an experienced startup immigration attorney who can present a strong legal argument for the H-1B as well as efficiently streamline the H-1B transfer process.