Hiring a Foreign National for Your StartUp: A Brave New World
Several months ago, I was invited to join UpCounsel, a San Francisco-based startup and one of the latest additions in the legal industry, after LegalZoom and Rocket Lawyer. UpCounsel is basically an interactive platform for legal services with a twist: the company guarantees payment to its lawyers.
Since then, I’ve dealt with many startups and their founders. As a matter of fact, I receive every week questions such as, “I am currently working for a US company and wish to start my own” or “I started my own company but my partner is a foreigner.” “What type of visa is available to me or my business partner?”
In the eyes of immigration authorities, startups suffer from two common problems: their lack of funding and/or their non-traditional management style. On August 2, 2011, Secretary of Homeland Security Janet Napolitano and U.S. Citizenship and Immigration Services Director Alejandro Mayorkas outlined a series of policy, operational and outreach efforts to promote startup enterprises and spur job creation. However, since 2010, all bills aiming at creating a “Startup Visa” have been stalled in the legislative process in Congress.
Without a true Startup Visa, the immigration lawyer is left with non-startup specific options. Here is a quick look at some of them: the F-1/OPT, the H-1B, the E and the O.
Upon graduating from their studies, foreign students have the option to apply for an OPT, or Optional Practical Training, valid for one year. OPTs are generally used by young graduates to get their first work experience in the US. Unknown to many, the law allows students to start their own businesses as long as this business is directly related to the student’s major area of study. Since 2007, graduate students in the area of Science, Technology, Engineering and Math (acronym STEM) are eligible for an additional extension of their OPTSs of 17 months, for a total of 29 months. In order to qualify for the 17-month extension, the student’s business needs to register with E-verify. Therefore, OPTs provide a gap solution to the H-1B quota issue faced by many startup founders.
Despite an annual quota that was reached within a week last year, the H-1B remains the most popular visa with computer-related professions. Microsoft requested an average of 4,000 H-1B visas annually between 2010 and 2013, more than any other corporation. The initial DHS (Department of Homeland Security) Entrepreneur policy announcement of August 2, 2011 acknowledged that the H-1B beneficiary who is the sole owner of the petitioning company may establish a valid employer-employee relationship for the purposes of qualifying for an H-1B nonimmigrant visa. However, USCIS (United States Citizenship and Immigration Services) appears to hold the line about the need to demonstrate the existence of this employee-employer relationship through corporate means, such as by creating a Board of Directors, which has the ability to control the beneficiary’s employment. In this case, it is good practice for startup founders to hire a corporate attorney that will know how to draft corporate documents that can stand the immigration test.
A great alternative to OPT and H1-B visas are E-visas. They present the advantage of being exempted from any quotas, but are unfortunately reserved to certain nationals of countries that signed treaties with the US. While a majority of European countries qualifies, entrepreneurs from the dynamic BRIC countries are excluded (Brazil, Russia, India and China). E-1 visas require a business model that involves substantial trade (goods and services) between the US and the foreign state, while E-2s require a substantial investment from the foreign investor in a US enterprise. Both visas require that the US Enterprise have the present or future capacity to generate more than enough income to provide a minimal living for the investor and his or her family. Along with funding, startups may have difficulties meeting the criteria to allow them to qualify for this visa type.
The fourth possible visa alternative is the O-visa. It is reserved for those entrepreneurs who are able to demonstrate extraordinary ability in the sciences, arts, education, business, athletics, film or television industry. The wording seems a bit intimidating but O-1’s set of criteria allow many entrepreneurs to qualify if their activities have been covered in the press and online. The biggest hurdle for startups in this category is that the O does not allow self-petitioning. As such, startup founders have to follow the same precautions as in the H-1B visa context and must create separate business entities where the employer-employee relationship is a valid one and where the right of control of the employee by the employer is clearly defined. If these hurdles are surmounted, the O visa can be a great solution as this visa classification is one of few that does not provide for any express minimum or prevailing wage obligation.
In conclusion, several immigration options are available to foreign startup founders but by nature, startups have a hard time to satisfy nonimmigrant visa requirements designed for established companies. Last month, President Obama vowed to make it “easier and faster for high-skilled immigrants, graduates, and entrepreneurs to stay and contribute to our economy,” but remained mum on the details. While this seems to confirm a new direction taken by the government in 2011, time will show if USCIS immigration officers are willing to reverse, de facto, the culture of “no” towards startups.
You can contact me at email@example.com. JS Barkats is a full-service business law firm delivering legal services to the startup community in the areas of business law, securities law and crowdfunding, IP law, business litigation and bankruptcy.
Coming January 2015, every 2nd Monday of the month, business breakfast club at our Midtown office. To register, email RSVP@jsbarkats.com.
Ophelie M. Jaschke
Head of Immigration Group
This post is also available in: Spanish