H-1B and Entrepreneurship: How to Start a Business in the U.S.

Foreign professionals on H-1B status have long wondered whether they can found a company in the United States while working for a sponsoring employer. The answer, which for years was a qualified yes surrounded by caveats, gained clearer shape with regulations published by the Department of Homeland Security (DHS) at the end of 2024 and in effect since January 2025. Today, an H-1B holder may legitimately be a founder, majority shareholder, and even CEO of their own company, provided they follow a specific corporate and contractual architecture.

This article covers what changed, what remains legally sensitive, and how to structure an operation that will survive USCIS scrutiny. The rules described reflect the regulatory landscape current as of 2026 and should be interpreted with the support of a specialized attorney, given the history of rigorous enforcement in this type of petition.

The watershed moment: the 2025 rule

The rule Modernizing H-1B Requirements, Providing Flexibility in the F-1 Program, and Program Improvements, published in the Federal Register on December 18, 2024, took effect on January 17, 2025, and codified in 8 CFR the possibility for an H-1B beneficiary to also be the controlling shareholder of the petitioning company. The previous interpretation, based on the 2010 Neufeld memorandum, required complex legal constructions to demonstrate separation between founder and company. The new rule reduces that friction and gives foreign entrepreneurs greater predictability.

Three points of the regulation deserve emphasis: the express permission for majority participation by the beneficiary, the continued requirement of a bona fide employer-employee relationship, and the reduced initial validity period of petitions — up to 18 months for the first approval and first extension for beneficiary-owners.

What still applies

The relaxed rules do not waive the classic pillars of H-1B. The position offered by the company founded by the beneficiary must still be a specialty occupation — that is, it must require at least a bachelor’s degree or equivalent in a specific field related to the duties. The Labor Condition Application (LCA) filed with the Department of Labor remains mandatory, with wages paid at the prevailing wage level for the occupation and work location.

The employer-employee relationship, though somewhat more flexible, continues to be verified. USCIS still applies the factors derived from the common-law agency doctrine and the case Nationwide Mutual Insurance Co. v. Darden, evaluating who supervises the work, who holds the power to hire, fire, and discipline, who provides equipment, and who retains authority over the results.

How to demonstrate control when you are the owner

The critical point of a beneficiary-owner petition is proving that someone or some structure has actual authority over the founder’s employment. The most accepted solutions involve governance mechanisms that limit the entrepreneur’s unilateral power over their own position.

A board of directors with independent members — outside investors, mentors with formal voting power, strategic partners — is the most common configuration. The board must have documented authority to hire, supervise, compensate, and dismiss the beneficiary in their technical role. Meeting minutes, corporate by-laws, and shareholder agreements must unambiguously reflect this division of power.

Shareholder agreements with clauses limiting the founder’s control over HR decisions relating to their own role, executive committees with non-beneficiary members, and voting trusts are alternatives that experienced attorneys use to build the case for a bona fide employer-employee relationship.

Recommended corporate structure

The choice between LLC, S Corporation, and C Corporation has practical effects on the viability of the founder’s H-1B. The C Corporation offers the most robust asset and tax separation, simplifies the entry of outside investors, and is the preferred structure when venture capital fundraising is planned. Double taxation, while a disadvantage, is usually absorbed in early stages by companies that reinvest profits.

The S Corporation faces a significant limitation: shareholders must be U.S. citizens or permanent residents, which typically makes it unfeasible for H-1B holders without an approved green card. The LLC is flexible and avoids double taxation by default, but requires careful contractual construction to create the command separation required by USCIS — especially in single-member format.

Single-member LLCs without independent governance represent the riskiest scenario. Without a board, outside investors with voting rights, or a formal oversight mechanism, it is extremely difficult to convince an adjudicator that any entity controls the beneficiary’s employment.

Compared scenarios

Consider two examples. In the first, a software engineer forms a C Corporation, secures seed funding, assigns 30% equity to two outside investors, and establishes a three-member board with power to remove the CEO. The company petitions the H-1B for the founder in the role of Lead Architect, with a job description requiring a bachelor’s degree in Computer Science and a detailed description of technical tasks occupying at least 80% of the work schedule. This case tends toward approval.

In the second, a designer forms a single-member LLC, is the sole member, has no outside investors or board, and self-petitions for the H-1B. There is no demonstrable mechanism of control over their employment, and the role typically mixes administrative and operational activities with technical work. The petition faces a high probability of an RFE and denial.

Reduced validity and renewals

The 2025 rule provides that the first approval and the first extension for beneficiary-owners be issued with a validity period of up to 18 months, rather than the typical three years of an H-1B. The stated objective by DHS is to allow more frequent reassessment of the company’s operational legitimacy in its early stages.

Starting from the second extension, validity may return to three years, conditioned on demonstrating that the business continues to operate, the beneficiary continues to perform a specialty occupation role, and the governance structure remains intact. The evidentiary burden is ongoing: corporate tax returns, payroll records, client contracts, revenue documentation, and board minutes form the dossier for each renewal.

Remote work and multiple locations

Entrepreneurs frequently operate from multiple locations. The H-1B authorizes work within the metropolitan statistical area (MSA) declared in the LCA. Changes of worksite beyond 50 miles that last more than 60 business days require a new LCA and, in many cases, an amended petition. Remote work from the beneficiary’s residence within the same MSA is generally covered, but warrants review in light of the most recent USCIS guidelines on place of employment.

Business operations outside the U.S.

H-1B holders may maintain ownership interests in companies abroad, provided they do not perform services for those companies on U.S. soil without compatible authorization. Revenue generated and deposited outside the U.S., originating from activity performed outside the U.S., does not violate status. The dividing line is geographic and functional: compensated work performed on U.S. soil must be authorized under the active H-1B.

Alternatives for those with capital

When a project requires full operational involvement and the H-1B structure becomes strained, alternative immigration pathways are worth considering. The EB-5 Immigrant Investor Program remains available, with a minimum investment of $1,050,000 in standard projects or $800,000 in Targeted Employment Areas and regional centers, per the amounts established by the EB-5 Reform and Integrity Act of 2022.

The E-2 Treaty Investor visa is an option for nationals of countries with a bilateral treaty with the U.S., although Brazil is not among them. The O-1A for extraordinary ability serves founders with a proven track record of recognition. The International Entrepreneur Parole, reactivated in recent regulatory rounds, offers temporary stay for startup founders who have raised a minimum volume of qualified investment.

Risks of violation

Operating one’s own company without adequate structuring while under an H-1B sponsored by a third party can constitute unauthorized employment and lead to revocation of status, with cascading effects on future consular proceedings and green card applications. Activities such as receiving a direct salary from one’s own company without an approved petition, acting as full-time CEO, or hiring employees under direct employment constitute a clear violation.

Preparatory activities — such as drafting a business plan, registering the entity, conducting market research, raising investors, and participating on an advisory board — are generally compatible with the active H-1B, as long as they do not involve direct compensation or compromise the dedication to the sponsoring employer. The line between preparation and operation is the key, and crossing it without an approved petition is the most common mistake among entrepreneurs.

Victoria Harper

Editor-in-Chief

Meet the author

Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.