by on Dear Sophie,
I was recently laid off. I’m co-founding a cleantech startup with two of my former colleagues, who were also laid off. Both of my co-founders are on H-1Bs and had green cards in the works with our former company. I’m a U.S. citizen.
What do we need to do to transfer their H-1Bs and green cards to our startup? Based on your experience, do investors care about the amount of money a startup spends on visas and green cards for their founders?
— First-time Founder
Image Credits: Joanna Buniak / Sophie Alcorn
Dear First-time,
Congrats to you and your co-founders on dreaming big and taking the leap to create your own startup! I appreciate your dedication to the environment, your tenacity, and your spirit of innovation.
Let me take your second question first. Based on my experience, the majority of U.S. investors who invest in my international founder clients tend to be interested in whether the startups have an innovative idea with some initial traction, a strong founding team and are structured as a Delaware C-corporation. Many investors I’ve worked with have been very supportive of immigration efforts that keep founding teams and key talent together in the United States to build and scale their startups, even if that means paying higher wages than typical for founders in the startup market to ensure compliance with various immigration requirements.
That said, you can broaden your funding sources by considering grants, particularly since your focus is cleantech. The big benefit of grants is that they are non-dilutive capital. And they don’t require repayment like a loan. You have a contract with deliverables that you as startup founders define.
What’s more, grants and other funding can help your co-founders qualify for an EB-1A extraordinary ability green card, which I’ll discuss in more detail in a bit. These funds can also be used to pay your co-founders’ legal and filing fees for their H-1Bs as well as their H-1B salaries.
Now let me dive into your initial question, starting with H-1B transfers.
H-1B Transfers
As you and your co-founders know, they have a 60-day grace period from their last day of employment in their former H-1B role until they have to leave the U.S. or apply for another status. Transferring your co-founders’ H-1Bs to your startup is definitely possible, but you’ll want to start immediately. It’s important to take the steps necessary to qualify your startup for sponsoring the H-1Bs before proceeding with the transfer. And it’s important to take those steps quickly since the 60-day grace period for your co-founders is already counting down.
You should talk to both an immigration attorney and a corporate attorney. A corporate attorney can help you set up your company, including drafting bylaws, and an immigration attorney can help you determine the best strategy for your co-founders based on their personal and business goals.
Generally, U.S. investors want to invest in Delaware C-corporations. Even though you incorporate in the state of Delaware, your startup can be based anywhere in the U.S. and must register separately to do business there.
Once your company exists, is operational, and has officially extended job offers to your co-founders, it can initiate the H-1B transfer process. Your company will be filing an H-1B petition without having to register your co-founders in the lottery.
First, your startup’s immigration attorney needs to get your startup’s Federal Employer Identification Number (FEIN) verified by the U.S. Department of Labor’s Office of Foreign Labor Certification, which takes about a week. Next, your immigration attorney would need to file a Labor Condition Application (LCA) with the Labor Department. The LCA is meant to ensure that no American workers are available to fill the position that the prospective H-1B recipient is being offered and prevent any negative impact on the wages and working conditions of American workers.
It’s great that your startup already has three co-founders. To meet the H-1B sponsorship requirements, your startup must demonstrate to U.S. Citizenship and Immigration Services (USCIS) that an employer-employee relationship exists between your startup and your co-founders for the H-1B transfer. This means your co-founders must not own more than 50% of the startup company, and someone else (like you!) must formally hire them, supervise them and their work and have the ability to fire them.
For the H-1B, your startup must have the ability to pay the prevailing wage to your co-founders based on their position and geographical location, as well as cover your operations for the term of the visas (usually up to three years for an H-1B transfer). You’ll also need to work with your immigration attorney to ensure that the roles your co-founders will be working in will qualify as “specialty occupations.”
If the Labor Department approves the LCA, your startup can file the H-1B petitions to USCIS. I typically recommend filing the petitions with premium processing to ensure that you get a decision or a request for information within 15 days. Your co-founders can start working when your startup receives a receipt notice from USCIS.
Green card sponsorship
Like the H-1B, a new green card petition will need to be filed for your co-founders. Your startup can extend your co-founders’ H-1B visa beyond six years once USCIS approves their respective Form I-140 green card applications.
Since your previous employer-sponsored your co-founders for green cards, your co-founders can use the priority date from the previous petition. Their priority date is when their former employer either filed for PERM labor certification with the Labor Department or filed the I-140 green card application with USCIS and represents their place in the line for a green card. Using the original priority date will cut down on the wait time for a green card number for your co-founders, particularly if either of them was born in India or China.
The EB-1A and the EB-2 NIW (National Interest Waiver) are the two employment-based green cards that individuals can apply for on their own. Employers can also sponsor individuals for an EB-1A or EB-2 NIW green card, but they must demonstrate to USCIS they have the ability to pay each individual’s wage. USCIS recently issued guidance on how it analyzes an employer’s ability to pay and the financial strength of its business by requiring the employer to submit annual reports, federal tax returns, or audited financial statements for each available year from the individual’s priority date.
If your co-founders were born in either India or China and would otherwise have a long wait until their priority date becomes current, I would recommend that they each self-petition for an EB-1A extraordinary-ability green card, which is available for premium processing, which means USCIS will make a decision on the petition or issue a request for evidence within 15 days.
Self-petitioning for an EB-1A is much simpler and avoids all the financial requirements your startup would have to meet. Even if your startup does not sponsor the green cards, it could still cover the filing and legal fees associated with each co-founder’s green card petition. Talk to your immigration attorney to ensure they qualify.
You’ve got this!
All my best,
Sophie
Have a question for Sophie? Ask it here. We reserve the right to edit your submission for clarity and/or space.
The information provided in “Ask Sophie™” is general information and not legal advice. For more information on the limitations of “Ask Sophie™,” please view our full disclaimer. You can contact Sophie directly at Alcorn Immigration Law.
Sophie’s podcast, Immigration Law for Tech Startups, is available on all major platforms. If you’d like to be a guest, she’s accepting applications!
