Dear Sophie: How can I transfer my H-1B to my startup?

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.”

“Dear Sophie” columns are accessible for Extra Crunch subscribers; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.

Dear Sophie:

I’m employed at a major Silicon Valley tech company in H-1B status. I want to found a startup. How can I work at the startup?

—Enterprising in Emeryville

Hiya Enterprising,

Thanks — you’re in good company; a lot of people are inspired by amazing new ideas during the pandemic. It’s a great opportunity to seek life transitions and new adventures.

Short answer: It’s possible. To transfer your H-1B to the startup you need to meet the right conditions. It’s tricky, and you may need to give up control, so please talk to an attorney about this. For additional context, check out my podcast on H-1B Transfers for Startup Founders. Your attorney needs to ensure among other things that at least (1) the employer-employee relationship is properly established and (2) the company has the ability to pay. Depending on where you’re at, whether you have co-founders, whether there is investment yet, etc., the company might need to take various actions to qualify to petition you for the transfer.

Before we go into the details about transferring to a startup, let’s make sure you know what you can and can’t do while on an H-1B visa sponsored by another company. First, you are only allowed to work as detailed by your current H-1B petition file by your employer. If you work for your startup — even without pay — before transferring your H-1B to your startup, you risk losing your status and your ability to remain in the U.S.

There are many activities that some people in Silicon Valley are interested in that might jeopardize your current immigration status. For example, absolutely speak to an attorney before serving as a startup’s CEO and pitching investors as the CEO, doing any work at another company (whether paid or unpaid), or drawing a salary. Talk to an attorney, but providing advisory services for equity can be risky as well.

While on an H-1B sponsored by another company, some of the following activities might be allowed, but please confirm with your personal immigration attorney first:

• Create and register an LLC or C-Corp.
• Be a shareholder of the startup without providing advisory services or labor.
• Be a passive investor.
• Serve on the startup’s board of directors without equity.
• Meet with investors and board members.
• Hold certain titles in a company.

There are several things you should take into consideration before deciding whether to pursue transferring your H-1B to your startup in addition to relinquishing control of the startup and giving up a majority stake. It’s a great idea to map out your ideal situation before consulting an attorney. It’s great if you can propose your dream about your future role, how many co-founders you will have, how much equity everybody would receive, what roles the other co-founders would play, and what opportunities the hypothetical company may have to receive any investment.

Also keep in mind some H-1B basics:

• The H-1B visa allows a maximum stay in the U.S. of six years, and the time does not restart when you transfer your H-1B; you typically need a green card process in progress to receive additional time in H-1B.
• Your startup must have enough money on hand to support your salary and expenses, as well as the company’s operations for a couple of years (“Ability to Pay”).
• Your startup’s ability to sponsor you for a green card might be compromised depending on how much equity you would hold, so it could be wise to check your eligibility for green cards that don’t involve PERM, such as EB-1A and EB-2 NIW.

If you decide to go for it and transfer your H-1B to your startup, the company should work with an experienced startup immigration attorney to get properly set up to become your sponsoring employer before the I-129 is filed. If this theoretical company does not yet exist, you’ll want to create a legal entity, consider your equity and ensure there is a management structure in place.

Once the company exists, is operational, has some runway or traction, has extended you the offer, it can initiate the H-1B transfer process. Once you engage an immigration attorney, your startup would first need to get its Federal Employer Identification Number (FEIN) verified by the U.S. Department of Labor’s Office of Foreign Labor Certification. That step typically takes about a week.

Next, the startup’s immigration attorney would need to file a Labor Condition Application (LCA) with the Labor Department. What an LCA requires the H-1B sponsoring company to attest to can be generally summarized as follows, but there are more specifics that the company’s representative should carefully read and understand:

• The company will pay at least the prevailing wage based on the position and the location of the position.
• Hiring the H-1B beneficiary won’t negatively impact the wages and working conditions of current employees.
• No strike, lockout or other work action is in effect.
• All current employees have been notified of the company’s intent to hire the H-1B beneficiary, among others.

Employers don’t need to submit evidence for an LCA but must engage in posting, which can be done electronically. Employers also need to retain all supporting documents and make them available for public viewing.

If the Labor Department approves the LCA, your startup can file the H-1B petition to USCIS. Check out my podcast about what makes a strong H-1B. Your startup will need to make the legal argument that the position you are taking with your startup qualifies as a specialty occupation and that the requisite employer-employee relationship exists between you and the company you founded, as well as establishing the ability to pay. Check out the Dear Sophie column from a few months ago in which I discuss how to craft a strong H-1B petition.

A note on start-date strategy: In the petition, your company will also need to list your start date. Technically, you can start working when your startup receives a receipt from USCIS. However, if you work with your attorney, you can map out a later start date that will allow you to give two weeks’ notice to your former employer and preserve your current H-1B status.

You got this!

• Sophie

Have a question? Ask it here. We reserve the right to edit your submission for clarity and/or space. The information provided in “Dear Sophie” is general information and not legal advice. For more information on the limitations of “Dear Sophie,” please view our full disclaimer here. You can contact Sophie directly at Alcorn Immigration Law.

Sophie’s podcast, Immigration Law for Tech Startups, is available on all major podcast platforms. If you’d like to be a guest, she’s accepting applications!