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Thanks for the advice. It has helped me a lot. I am planning to move to Company B ASAP.

For #1, Is there anything that I or my new H1 employer can do, so that there will not be any issues in future(due to this violation)...like informing INS that i have moved to Company B etc (or anything else that you can think of)? In other words..what should i do now?

Yes, the I-94 is attached with the H1 doc with start date of Oct 2005.

I came to US through Company A on L1 in 2003. I am still working for company A. In May 2005, Company B applied for H1B - and got approved in Oct 2005 (valid till 2008). Company A applied for I-94 extension in Oct 2005 as my L1 expired in July 2005 and I-94 expired in Dec 2005. Now I got RFE...