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Historically, foreigners have been instrumental in the creation of many successful companies in the US. However, the US immigration laws have become less and less welcoming to foreigners who wish to create their own companies. In 2010, a memo was promulgated that made things much more difficult for entrepreneurial H-1B petitions.

Sometimes the foreigner who is seeking an immigration benefit may also be the majority owner of the company. The conflict between economic reality and U.S. immigration law is particularly acute in the H-1B category.

Obtaining an H-1b for a foreign national requires a sponsor but it becomes problematic when the sponsor is the company where the H-1B in the company’s owner.

The employee / owner type of H-1B filing became even more challenging after the January 8, 2010 Neufeld memo. This memo changed the face of H-1B filings and created enormous difficulty. The Neufeld memo addresses the employer-employee relationships in the H-1B context. The memo explains that H-1B employers must specifically establish the existence of such relationships, and must establish the employer’s right to control the employee in order to gain approval of the H-1B petition.

The issue of the employer’s right to control the employee is precisely what is problematic in the entrepreneurial company scenario. Under the Neufeld memo’s restrictive interpretation, it had seemed almost impossible to demonstrate an employer-employee relationship, if the H-1B petition beneficiary was also the company’s majority owner.

In response to much criticism that the government was discouraging potential entrepreneurs in a weak economy, the USCIS published a document which suggested a potential solution. The question-and-answer piece published in August 2011 offers some hope for utilization of the H-1B category for entrepreneurs. The USCIS states in that document that it is willing to accept the existence of an H-1B employer-employee relationship, even if the prospective H-1B employee owns a majority share of the company, as long as it can also be shown that there is some external check on the employee’s authority. The CIS referenced an independent board of directors as one solution. The Q&A states, “”… if the petitioner provides evidence that there is a separate Board of Directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary’s employment, the petitioner may be able to establish an employer-employee relationship with the beneficiary.” Recently, the USCIS created a web portal,Entrepreneurial Pathways. This further reinforces the concept of documenting a separation between a company and its owner to establish an employer-employee relationship.

The USCIS suggests that, in addition to an independent board of directors, it may be sufficient to show that there are preferred shareholders, investors, or other factors to demonstrate that the company controls the terms and conditions of the entrepreneur’s employment. The existence of this proof may be sufficient to establish a distinction between the entrepreneur’s ownership interest in the company and the right to control his/her employment. Accordingly, the H-1B may, in some instances, be available again to entrepreneurs. Of course, there are still difficult barriers to overcome, but this new development may help to alleviate some of the concerns that have arisen as a result of the 2010 Neufeld Memo.

In the PERM labor (Green card) context, the existence of an ownership interest in the sponsoring company is often an insurmountable obstacle with the U.S. Department of Labor. Therefore, while H-1B classification might permit an entrepreneur to start and develop his/her business, the entrepreneur might need to pursue another option in order to remain in the United States on a permanent basis.