Few startups questions with Partner who has H1B status


Myself and two other partners are planning to start a C-Corporation. One of the partners is on H1B visa sponsored by his employer and he is getting a W2 from them. We have few questions:

  1. Can a person on H1B Visa with a W2 be a founder/Owner of a C-Corporation
  2. If answer is no to # 1, then what are his options. Is there such thing as passive investor? And how can we allocate him share of the company as a passive investor?
  3. If he becomes a passive investor, does that mean he has to buy his part of the shares? And if we sell him share at lower value (example: 1cent per share) does that lower the valuation of our company?
  4. Are there any tax liabilities in case we have to close the C-Corporation?


Co-Founder Incorporation

asked Aug 23 '11 at 07:33
150 points

1 Answer


  1. Yes, your colleague with the H-1B visa can be a founder / shareholder of the company, but he cannot work for it (unless the new company obtains a work visa for him). Please see "Visa Basics for Foreign Entrepreneurs, Part 2: What Constitutes Work?" at http://danashultz.com/blog/2011/01/18/visa-basics-for-foreign-entrepreneurs-part-2-what-constitutes-work/.
  2. Not germane because of the answer to #1. [In effect, your colleague will be a passive investor.]
  3. You have a great deal of flexibility as to how much founders pay for their shares. However you must comply with any applicable state laws concerning determining the value for which shares are issued, and issuing shares to different shareholders at different prices around the same time can create tax problems.
  4. This question cannot be answered in the abstract - specific facts concerning the circumstances under which the corporation is dissolved must be presented.

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

answered Aug 23 '11 at 10:42
Dana Shultz
6,015 points
  • Hi Dana,Thanks for your quick reply. Regarding your answer # 3, how long the time difference should be between issuing shares to different shareholders at different prices? – Gagan 12 years ago

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Co-Founder Incorporation