Given the growing global talent pool and the increasing internationalization of startups, many companies face a challenge: they want to send founders or key employees to the US on a residential visa who need to be hired as US employees. This situation presents both opportunities and challenges. In this article, we’ll explore the intricacies of hiring in the US when founders or key personnel immigrate to the US to grow a foreign-owned business.
Understanding Visa Limitations
Before diving into hiring strategies, it’s crucial to understand the limitations imposed by different US visa types.
1. H-1B Visa
This classification allows individuals to be employed by a US company in a Specialty Occupation position, which requires a minimum of a bachelor’s degree (or foreign equivalent) to perform the job duties. The individual should also be able to show they possess a degree in a related field. H-1B holders can’t be self-employed, complicating matters for startup founders. For foreign-owned companies, you must set up a US entity. A whopping 98% of H-1B visa applications were approved by USCIS in 2023, generally approved in two to four months. However, the H-1B classification is subject to an annual lottery.
2. E-2 Visa
The E-2 visa is based on a Treaty of Trade and Commerce between the US and over 70 countries, including the UK, Canada, Mexico, and Germany. To qualify, the individual or business must show that they have made a substantial investment into a US entity and that they are coming to the US to lead and direct that business. Further, US businesses must be owned at least 50% by the nationals of the Treaty Country. One key benefit of the E-2 is that it allows the business to hire or transfer key employees to the US as a Manager, Executive, or Essential Employee. However, the applicant must possess the same nationality as the business.
Nearly 91% of E-2 visas were approved by USCIS in 2023. Approval can take five to six months.
3. L-1 Visa
The L-1 visa allows companies to transfer key employees to their US entities in Executive, Managerial, and Specialised Knowledge positions. To qualify, an applicant must show they have worked with a related company (outside of the US) for at least 12 months in a qualifying position outlined above, that they will hold a qualifying position in the US, and that the foreign and US entities have a qualifying corporate relationship. If the US entity has been “doing business” for less than one year, the L-1 will be classified as a new office L-1, which requires a 5-year business plan, and the validity of the first approval notice is typically limited to just one year.
This visa is used for intracompany transfers and can be helpful for international companies establishing a US presence. L-1 visa users are typically transferred to a US company operating as a subsidiary of the parent company. More than 95% of L-1 visas were approved by USCIS in 2023, and they are generally approved in two to six months.
4.F-1 Visa with OPT
International students can work in the US for a limited time after graduation under Optional Practical Training (OPT).
Each visa type comes with its own rules regarding employment and business ownership. Consult with an immigration attorney to fully understand your specific situation.
Establishing a Legal Entity
To hire employees in the US and sponsor a founder or key employee, you’ll need to establish a legal US entity, which is most often one of the two listed below.
1. C-Corporation
The most common choice for startups seeking venture capital.
2. Limited Liability Company (LLC)
Offers flexibility but may be less attractive to investors.
The choice of entity can impact your visa status, so again, consult with both immigration and tax advisors.
Compliance with Employment Laws
US employment laws are complex and vary by state. Key areas to consider that often elude founders entering the US on a visa include:
1. Anti-discrimination laws
The US has strict laws prohibiting discrimination based on race, color, religion, sex, national origin, age, disability, or genetic information.
2. Wage and hour laws
Ensure compliance with minimum wage, overtime, and employee classification rules. Even founders must pay themselves a salary that is compliant with wage regulations.
3. Employee benefits
Understand requirements for health insurance, paid time off, and other benefits. You’ll want to plan for health insurance coverage when you enter the US. Coming from a country with a national health system won’t protect you in the US.
4. Tax withholding
Proper collection and remittance of payroll taxes is crucial. You may be required to show evidence of this when renewing some visas.
5. Workers’ compensation
Most states require employers to carry workers’ compensation insurance. The fines for overlooking this coverage are significant.
To navigate these complexities, consider engaging Foothold America’s PEO+ Cross-Border Support™. This service was designed especially for international companies expanding to the US.
Developing a Robust HR Infrastructure
Given the complexities involved, investing in a robust HR infrastructure is crucial.
Step 1: Choose a respected payroll, benefits, and HR provider to manage complexities and employment tax filings.
Step 2: Develop clear policies and procedures documented in an employee handbook.
Step 3: Establish a structured onboarding process to integrate new hires effectively.
Step 4: Invest in training programs, especially around cross-cultural communication and collaboration.
Step 5: Regularly review and update HR practices to ensure ongoing compliance.
Leveraging External Expertise
Don’t hesitate to seek external help. The US is a super highway of entrepreneurs who aspire to make it big in America. You can achieve success without reinventing the wheel or making risky missteps.
- Regular consultations with your immigration attorney can help you stay compliant and plan for visa renewal or a green card.
- Get expert guidance from an experienced HR professional on best practices and compliance. Schedule a call with a US Expansion Advisor.
- An accountant or tax advisor experienced in your home country and US tax regulations is crucial to navigating business and payroll taxes, including transfer pricing best practices. Contact Foothold America’s trusted ecosystem for a referral.
- Connect with experienced entrepreneurs who have navigated similar challenges. Major US cities often have business networking groups for entrepreneurs who have emigrated from different countries. Here are a few examples.
The Great British Business Club – New York
Netherlands Entrepreneurs in Los Angeles
Canada US Business Association – Southfield Michigan
Planning for the Future
Some founders plan to return to their home country after stable US operations. Others never turn back. As your company grows, consider long-term strategies.
1. Explore options for permanent residency: The EB-1, EB-2, or EB-5 visa categories might offer paths to green cards.
2. Develop a succession plan: In case of visa issues, have a plan for leadership continuity.
3. Build a strong leadership team: Cultivate US citizen or permanent resident employees who can take on critical roles if needed.
Embracing the Challenge
While hiring in the US as a visa holder presents challenges, it also offers unique opportunities. Your international perspective can be a powerful differentiator in the competitive US market. By embracing your unique position, building a solid support network, and prioritizing compliance, you can make a thriving, diverse team that leverages the best of both worlds.
Remember, many successful US companies were founded or co-founded by immigrants. Your visa status doesn’t define your potential for success. With careful planning, expert guidance, and a commitment to building a robust and compliant organization, you can overcome the hurdles and create a thriving business in the US.
In conclusion, hiring in the US when key personnel are on visas requires careful navigation of legal, cultural, and practical challenges. You can grow your US team and business by understanding the limitations, leveraging your unique strengths, and building a robust support system. Stay informed, seek expert advice, and approach the process transparently and adaptably.
Conclusion
Hiring in the US presents both opportunities and challenges for foreign companies. Understanding different employment models and their tax implications allows you to make informed decisions that align with your business goals and minimize tax liabilities.
Key takeaways include:
- Choose the suitable employment model based on your business needs and risk tolerance.
- Work with a provider that can transition you to a different hiring model as your needs change.
- Understand the tax implications of each hiring approach.
- Stay compliant with both federal and state tax requirements.
- Leverage tax treaties and available credits/deductions to optimize your tax position.
- Maintain accurate records and work with experienced tax professionals.
Remember, while this guide provides a foundation for understanding US hiring and tax considerations, each company’s situation is unique. Careful planning and expert advice are crucial to developing a tax-efficient strategy for your US operations. By taking a proactive, informed approach, you can successfully navigate the complexities of US hiring and taxation, positioning your company for growth in the American market.
Want to know more? Let's connect!
Laurie Spicer
UK Based
Over 25 years experience doing business in North American, European, and Asian markets with a primary focus and specialism on the complexity of the US market.
Lamar Manning
UK Based
Experienced HR professional with over 11 years of experience in driving business growth. Possessing dual US and UK citizenship, Lamar has experience in US HR, payroll and recruitment, bringing a unique perspective and international expertise to his approach.
